Investors' intro pack 2018 - July 2018 Zurich Insurance Group
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investors’ intro pack 2018 July 2018 Zurich Insurance Group
GROUP
Our proposition to investors
HIGHLY CASH GENERATIVE BUSINESS MODEL SUPPORTING AN ATTRACTIVE AND GROWING DIVIDEND, SUPPORTED BY:
A balanced Industry leading Stable, consistent Consistent growth
and diverse capital levels and conservatively with scope to
global business managed balance enhance returns
sheet through capital
re-deployment
© Zurich
July 2018 Investors' intro pack 2018 2
GROUP
One of few genuinely global insurers
KEY FACTS1 A BALANCED GLOBAL BUSINESS1
USD 63bn total revenues
USD 315bn total group and unit linked investments 28%
Property & Casualty
BOP BY 34%
USD 3.8bn business operating profit (BOP) Life
BUSINESS (%)3
Farmers
USD 3.0bn net income attributable to shareholders (NIAS) 38%
216% SST regulatory solvency ratio2
132% Zurich Economic Capital (Z-ECM) ratio calibrated 25% Europe
to ‘AA’ rating (1 in 2000 year event) BOP BY North America (incl. Farmers)
REGION (%)3 57% Asia Pacific
11%
USD 33bn shareholders’ equity Latin America
7%
USD 46bn market cap
1 Values are for the full year 2017 unless otherwise noted. Investments, solvency ratios, shareholders’ equity and market cap are as of December 31, 2017.
2 The Swiss Solvency Test (SST) ratio as of January 1, 2018 is calculated based on the Group’s internal model, which is subject to the review and approval of the Group’s regulator, the Swiss
© Zurich
Financial Market Supervisory Authority (FINMA).
3 BOP split by business excludes Group Functions and Operations, and Non-Core Businesses. BOP split by region excludes additionally Group Reinsurance.
July 2018 Investors' intro pack 2018 3
GROUP
Genuinely global franchise with distinct capabilities
NORTH AMERICA EMEA
#5 in commercial insurance #4 insurance company overall
#2 in crop insurance #2 in P&C, #3 in life
#7 in US personal lines ASIA PACIFIC
#8 in P&C, #6 in life
Top 3 through Farmers Exchanges1
#5 in P&C, #12 in life
#7 in P&C, #13 in life
#5 in P&C, #4 in life4
#10 in P&C5
cross-border #12 in P&C, #9 in life
#10 in P&C, #2 in life
insurer to LATIN AMERICA
#6 in P&C, #2 in life
multinational
#4 insurance company overall3
corporations2
#3 Global Travel Insurer
Source: Axco, Company reports and presentations, local statistics (2017 or most recent available), SNL Financial, Strategic Insight, Zurich internal data.
1 Provided for informational purposes only. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides
certain non-claims administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.
2 Estimate based on annual reports and investor presentations.
3 Pro-forma for the acquisition of the QBE operations in Argentina, Ecuador, Brazil, Colombia and Mexico.
© Zurich
4 #1 in individual Life, #6 in group life. Pro-forma for the acquisition of the Life insurance business of ANZ (OnePath Life).
5 Life business not among top 20.
July 2018 Investors' intro pack 2018 4
GROUP
Strong capital position and cash generation
VERY STRONG FINANCIAL STRENGTH STRONG CAPITAL POSITION, Z-ECM (%)
140% 127% 122% 132% 133%
AA- / outlook ‘stable’ 119% 121% 125%
120% 114%
Target
100% Range
Aa3 / outlook ‘stable’ 103%
80%
60%
A+ (Superior) / outlook ‘stable’ FY-10 FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 Q1-18e1
HIGHLY CASH GENERATIVE, CASH REMITTANCE (USDbn) Z-ECM RATIO DEVELOPMENT (%)
3.7 3.9 3.7
2.9 2.8 Property & Casualty
2.1 12% -12% 132%
2.4 1.7 2.5 125% -2% 0% -2%
2.4 Life 11%
1.4 0.9 2.0
0.6 0.9 0.4 1.1 Farmers
0.7 0.6 1.5
0.9 1.2 1.1 1.2
0.5 0.0 0.1 0.5 0.1 Group Functions FY-16 Business Insurance Market Market Dividend Other FY-17
-1.1 -1.1 -1.0 -0.6 -0.8 -0.9
-0.2 profit risk risk change accrual
Non-Core Businesses
FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 incl. anti
IFRS NIAS
dilution
3.9 4.0 3.9 1.8 3.2 3.0 measures
© Zurich
1 Q1-18 Z-ECM reflects midpoint estimate with an error margin of +/- 5ppts.
July 2018 Investors' intro pack 2018 5
GROUP
2017-2019 Financial targets1
BOPAT ROE2 in excess of 12% and increasing, despite higher equity base
USD 1.5bn in net savings by 2019 compared to the 2015 baseline
Z-ECM target ratio of 100-120%
Cash remittances in excess of USD 9.5bn over 2017-2019 period
© Zurich
1 BOPAT ROE target to be increased by ~50bps for OnePath Life acquisition on completion of transaction (as announced on December 11, 2017).
2 Business Operating Profit after tax return on equity, excluding unrealized gains and losses.
July 2018 Investors' intro pack 2018 6
GROUP
On track to deliver our 2017-2019 targets
BOPAT ROE (%)1 Z-ECM RATIO (%) CUMULATIVE CASH REMITTANCES
(USDbn)
12.1% >12.0% 133% >9.5
120%
100%
3.7
FY-17 Target2 Q1-18e3 Target range FY-17 2017 - 2019 Target
CUMULATIVE NET
EXPENSE SAVINGS (USDm) USD 700m
as of FY-17
2015 2016 2017 2018 2019
Achieved
100%
Target ~300 ~700 ~1,100 1,500
1 Business Operating Profit after tax return on equity, excluding unrealized gains and losses. FY-17 adjusted for the impact of the hurricanes Harvey, Irma and Maria,
charges related to the Group’s restructuring recognized through BOP and the change to the UK capital gains tax indexation relief.
© Zurich
2 BOPAT ROE target to be increased by ~50bps for OnePath Life acquisition on completion of transaction (as announced on December 11, 2017).
3 Q1-18 Z-ECM reflects midpoint estimate with an error margin of +/- 5ppts.
July 2018 Investors' intro pack 2018 7
GROUP
Continued delivery across all businesses
P&C LIFE FARMERS EXCHANGES2
100.9%
reported
COMBINED RATIO (%)1 BOP GROWTH (%)1 COMBINED RATIO (CR) (%)
103.9% 101.6%
98.1% 98.2% 7.1%
+22% 7.3%
2.6% 3.1%
31.7% 31.8%
96.8% 94.3%
65.7% 64.8%
-1.8% -1.4%
FY-16 FY-17 FY-16 FY-17
FY-16 FY-17
Cat ER AY LR ex-cat PYD Catastrophes CR excl. catastrophes
LIKE-FOR-LIKE GWP GROWTH (%) FY-17 APE SHARE OF NON-TRADITIONAL PRODUCTS GWP GROWTH (USDm)3
+3%
FY-15 3%
19,066 19,663
FY-16 -3% UL, protection
and Corporate
FY-17 1% Life & Pension 89%
FY-16 FY-17
1 FY-17 adjusted for the impact of the hurricanes Harvey, Irma and Maria and the change to the UK capital gains tax indexation relief.
2 Provided for informational purposes only. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the
© Zurich
Group, provides certain non-claims administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.
3 Continuing operations only, excludes discontinued operations (21st Century business outside of California and Hawaii mainly).
July 2018 Investors' intro pack 2018 8
GROUP
Indicative ROE development enhanced by OnePath life
acquisition, US tax reform and capital return
ILLUSTRATIVE BOPAT ROE DEVELOPMENT
0-1%
~14%
~0.5%
~0.5%
12.1% ~1.75%
12%1
1.5-2% ~0.5%
0.5-1%
FY-172 Growth in Life & Farmers Loss ratio Expense savings US tax Capital 2019 Non-operating NIAS ROE
equity base and growth improvement allocation items
market impacts (incl. OnePath / Other
Life acquisition)3
1 BOPAT ROE target to be increased by ~50bps for OnePath Life acquisition on completion of transaction (as announced on December 11, 2017).
2 FY-17 adjusted for the impact of the hurricanes Harvey, Irma and Maria, charges related to the Group’s restructuring recognized through BOP and the change to the UK
© Zurich
capital gains tax indexation relief.
3 Including expected impact of OnePath Life acquisition in Australia subject to regulatory approval.
July 2018 Investors' intro pack 2018 9GROUP
We have strengthened our businesses, extracted capital from non-
core portfolios and returned in 2017 ~USD 3.8bn to shareholders
MAIN DIVESTMENTS AND MAIN ACQUISITIONS TYPE OF BUSINESS STRATEGIC RATIONALE
CAPITAL ACTIONS DEAL Skills Distribution Scale
Sale of P&C business in Middle East Cover-More/ Halo M&A P&C Retail - Travel
Sale of P&C business in Taiwan
Standard Chartered D.A.2 Life Retail
Reinsurance of a closed annuity book
2017
2017
Reinsurance of an individual Life risk portfolio
OnePath (ANZ Life) M&A Life Retail - Protection
Sale of workplace pensions and savings business
Sale of a MedMal legacy portfolio Bright Box M&A Connected cars
Sale of a Singapore Life portfolio QBE Latam M&A P&C
2018
2018
Sale of Endsleigh Travel Ace/ Universal Travel M&A P&C Retail - Travel
Sale of NSW CTP1 run-off EuroAmerica M&A/P.T.2 Life Retail
© Zurich
1 New South Wales Compulsory Third Party motor liability.
2 D.A. = Distribution agreement. P.T. = Portfolio transfer.
July 2018 Investors' intro pack 2018 10Property & Casualty
PROPERTY & CASUALTY
Leading commercial insurer, and one of the few genuinely
global players
FOOTPRINT BUSINESS MIX CUSTOMER UNITS
FY-17 Gross Written Premiums by region (%)1 FY-17 Gross Written Premiums by line of business FY-17 Gross Written Premiums by customer unit
(%) (%)1
8% 10%
7% 23%
41% 23%
USD USD USD 46%
33.0bn 33.0bn 54% 33.0bn
44% 26%
17%
EMEA APAC Motor Special lines Commercial insurance Retail insurance
North America Latin America Property Worker Injury
Liability
© Zurich
1 The split by region or customer unit excludes Group Reinsurance and Eliminations.
July 2018 Investors' intro pack 2018 12PROPERTY & CASUALTY
We have stabilized our P&C business and show continuous
improvement in the P&C combined ratio
AY LOSS RATIO EXCLUDING OTHER UNDERWRITING EXPENSE COMMISSION RATIO (%)3
CATASTROPHES (%)1 (OUE) RATIO (%)3
-3.4ppts
68.2%
+1.8ppts
-1.8ppts
65.7% 16.1% 15.9%
64.8%2 15.4% 14.7%
14.2% 14.0%
FY-154 FY-16 FY-17
FY-154 FY-16 FY-17 FY-154 FY-16 FY-17
Cat1 3.5% 2.6% 5.8%
PYD1 0.1% -1.8% -1.4%
1 Accident year loss ratio (AY LR) excludes prior year reserve development (PYD). Catastrophes include major and mid-sized catastrophes including significant weather-related events.
2 FY-17 adjusted for the impact of the hurricanes Harvey, Irma and Maria.
© Zurich
3 Expense ratio also includes the insurance premium tax (i.e., 1.6% for the years in scope), not shown in this page.
4 FY-15 has not been restated.
July 2018 Investors' intro pack 2018 13PROPERTY & CASUALTY
Combined ratio and BOP improved strongly
COMBINED RATIO SPLIT (%)1 BOP SPLIT (USDm)1
100.9%
reported USD 1,546m
reported
-5.4ppts
103.6% 2,437 2,344
98.1% 98.2%
67 127 191
864
31.7% 0
31.7% 31.8%
3.5% 1,891 1,847
2.6% 3.1%
2,002
68.2% 65.7% 485 469
64.8%
-29 -108 -133 -38 -124
-1,002
0.1% -1.8% -1.4%
FY-15 FY-16 FY-17 FY-15 FY-16 FY-17
Non-controlling interest Realized capital gains Underwriting result
Expense Ratio Catastrophes2 AY LR (excl. catastrophes)3 PYD Non-technical result Investment income
1 FY-15 has not been restated. FY-17 adjusted for the impact of the hurricanes Harvey, Irma and Maria and charges related to the Group’s restructuring recognized through BOP.
© Zurich
2 Catastrophes include major and mid-sized catastrophes, including significant weather related events.
3 Accident year combined ratio (AY CR) excludes prior year reserve development (PYD).
July 2018 Investors' intro pack 2018 14PROPERTY & CASUALTY
Reinsurance program in line with Group risk appetite
GROUP CATASTROPHE REINSURANCE PROTECTION (USDm)
200
105
200
200
750
750 200
750
350 200
750 250
468 250 250
600 600 300 7503
510
200
Europe US US Rest of World all perils Global aggregate cat treaty
all perils1 all perils (excl. EQ) earthquakes
Global aggregate cat treaty Combined global cat treaty2 US wind swap Global cat treaty Regional cat treaties Retention 10% co-participation
1 Europe cat treaty calculated with EUR/USD exchange rate as of December 31, 2017.
© Zurich
2 This USD 200m cover can be used only once, either for aggregated losses or for an individual occurrence or event.
3 Franchise deductible of USD 25m, i.e., losses greater than USD 25m count towards erosion of the retention (annual aggregate deductible).
July 2018 Investors' intro pack 2018 15PROPERTY & CASUALTY
Our reinsurance has been effective in protecting earnings and
reducing earnings volatility
Q3-17 NET IMPACT FROM SIGNIFICANT CAT (USDbn)1 LARGE LOSS VOLATILITY
U.S. P&C market % of HY-17
share2 (%) Shareholders equity
AIG 3.0 2.4 5
2014/2015
8ppts
Chubb 1.9 3.3 3
Allstate 0.9 5.1 3
Zurich 0.7 2.1 2 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15
Travelers 0.7 3.9 2
2016/2017
QBE 0.6 0.7 4
0.5 0.5Life
LIFE
Our Life business is where others want to be; low risk and
focused on protection and unit-linked business
FOOTPRINT BUSINESS MIX DISTRIBUTION MIX
FY-17 Annual premium equivalent by region (%) FY-17 Annual premium equivalent by line of FY-17 Annual premium equivalent by pillar (%)
business (%)
Savings & Annuity
Unit Linked
11%
26%
23%
35% Protection 28%
40%
USD 29% USD
4%
4.9bn 4.9bn
5% Corporate Pensions
68%
FY-17 Technical reserves by line of business (%) 31%
Traditional
& Other 41%
59% Unit-Linked
EMEA APAC & Savings Corporate Life & Pensions Others
North America Latin America Banks
© Zurich
July 2018 Investors' intro pack 2018 18LIFE
Revenue streams have low market dependency
DRIVERS OF OUR IFRS PROFITABILITY (USDm)
REVENUES
Loadings & fees 2,708 775 3,483 Policy charges and fees mainly designed to cover distribution costs
Investment margin 642 Returns on our assets, plus share of returns on policyholder assets
Technical margin 946 Revenues on mortality and other ‘risk’ products, after allowing for claims costs
EXPENSES
Operating costs -1,381 The costs we incur running the business
Acquisition costs -2,488 What we pay to distributors
Deferral impacts 177 Accounting adjustment to spread distribution costs over policy terms
OPERATING PROFIT
FY-17 BOP 1,380
UL fund based fees
© Zurich
July 2018 Investors' intro pack 2018 19LIFE
Focus on translating new business growth into tangible
measures of value
NEW BUSINESS VALUE (USDm) GLOBAL LIFE BOP (USDm)
+29% like- USD 1,258m
for-like1 reported
+28% +22%
999 1,380
1
164 1,130
840 1,079 296
49 782
249
125 165 195 132
126 76
43
112 88 66
29 25
892 889 952
541 605
526
-42 -8 -85 -2
FY-15 FY-16 FY-17 FY-15 FY-16 FY-172
Other Latin America APAC North America EMEA Other Latin America APAC North America EMEA
© Zurich
1 Like-for-like excludes Australia and Malaysia Takaful acquisitions.
2 FY-17 adjusted for the impact of charges related to the Group’s restructuring taken through BOP and the change to the UK capital gains tax indexation relief.
July 2018 Investors' intro pack 2018 20Farmers
FARMERS
A unique structure
MAINLY A FEE BUSINESS TO ZURICH FARMERS’ UNIQUE STRUCTURE
The Farmers Exchanges1 are a group of US insurance companies,
which are owned by their policyholders
Zurich owns Farmers Management Services (FMS), which manages the Farmers Group, Inc. Farmers Exchanges1
Farmers Exchanges on behalf of the policyholders in an arrangement Provides Services Bear underwriting risk
known as an “attorney-in-fact” administration and and handle claims
management Fees as % of Premiums Own distribution assets
FMS receives fees from Farmers Exchanges for the services it provides
Zurich owned Policyholder owned
The fee based nature of the business model allows FMS to generate
stable earnings and high cash remittances FARMERS BOP HISTORY (USDm)2
1,722 1,691
1,402 1,516 1,573 1,421
Farmers Life manufactures life products sold through the Farmers 125 190 61 42 202 57
220
Farmers Life
distribution channels
1,428 1,478 1,415 FRe
1,390 1,383 1,360
FMS
Zurich also provides capital support to the Farmers Exchanges
-26
through Farmers Re
FY-12 FY-13 FY-14 FY-15 FY-16 FY-17
1 Provided for informational purposes only. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group,
© Zurich
provides certain non-claims administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.
2 With the full year 2016, Farmers Life business was moved from Life to Farmers, to reflect new management structure.
July 2018 Investors' intro pack 2018 22FARMERS EXCHANGES1
Leading player in US personal lines insurance
PROFILE US PERSONAL LINES2 MARKET
2017 Personal Lines Direct Premiums
Farmers Exchanges is the #3 personal lines1 insurer
of USD 325bn
in 29 ‘core’ states in the Western US Homeowners
Split of business is predominantly personal lines, 28% 29% Auto Liability
with some commercial lines product offerings for small businesses Auto Physical Damage
Primary distribution through ~13,500+ Exclusive Agents,
under Farmers brand 43%
Growing business in Eastern US
PERSONAL LINES2 MARKET SHARE (%) FARMERS PREMIUM SPLIT
Based on 2017 Personal Lines Direct Premiums of USD 325bn FY-17 Gross Written Premiums
of USD 19.9bn
18.3 Auto/Personal Umbrella
12%
1% Homeowners
9.1 9.0 10%
7.3 50% Business Insurance
5.8 5.6 4.9 3.3 Specialty
27%
Discontinued / Other
State Berkshire Allstate Progressive USAA Liberty Farmers Nation-
Farm Mutual wide
© Zurich
1 See footnote 1 on slide 22.
2 SNL data for 2017, as of April 20, 2018 - Personal lines defined as auto and homeowners multi peril for United States excluding territories.
July 2018 Investors' intro pack 2018 23FARMERS EXCHANGES1
Farmers vast distribution system
FOCUS IS ON EXCLUSIVE AGENTS
35,000 exclusive agents, district managers and licensed staff
34,200 independent agents
11,016 Farmers branded storefronts
Direct & Affinity Partners
© Zurich
1 See footnote 1 on slide 22.
July 2018 Investors' intro pack 2018 24FARMERS EXCHANGES1
Customer centered, agent powered
NET PROMOTER SCORE SURVEY RESPONSES (%) ~11K LOCAL STOREFRONTS ~14K DIGITAL STOREFRONTS
Average NPS
+72
Extremely satisfied
77%
with their agent
BROAD PRODUCT SUITE2
23% Other -43
© Zurich
1 See footnote 1 on slide 22.
2 Life, Pet and Financial products administered by Farmers Life and third party servicers.
July 2018 Investors' intro pack 2018 25FARMERS EXCHANGES1
Improving underlying performance at the Farmers exchanges
with top-line growth
GWP GROWTH (%) COMBINED RATIO (%) SURPLUS (USDbn)
38.5% 38.7%
5.1% 103.9% 36.6% 37.0%
101.9% 101.6%
99.4% 7.1%
6.0% 7.3%
5.2%
3.6%
3.3% 5.5 5.5 5.5
3.1% 5.4
2.4%
95.9% 96.8%
94.2% 94.3%
1.0%
0.0%
FY-14 FY-15 FY-16 FY-17 FY-14 FY-15 FY-16 FY-17 FY-14 FY-15 FY-16 FY-17
Continuing Operations2 Catastrophe losses Surplus ratio
Total CR (excl. catastrophe losses) Farmers Exchanges surplus
1 See footnote 1 on slide 22.
© Zurich
2 Excludes 21st Century business outside of California and Hawaii reflecting the decision made in October 2015 to retire the 21st Century brand from all states excluding California and Hawaii
and other discontinued operations.
July 2018 Investors' intro pack 2018 26FARMERS EXCHANGES1
Significant opportunities for growth
OPPORTUNITY TO DEEPEN CUSTOMER ACTIVATION OF AGENTS FOR SME EXPANSION INTO EASTERN UNITED
PENETRATION OPPORTUNITY STATES2
(FARMERS HOUSEHOLDS BY PRODUCT) (PERCENTAGE OF AGENTS, GWP) (GWP, USDm)
3 or more lines of 884
business
15% 691
486
85%
53% Monoline
2 lines of 32% 256
business
26% 113
36
4
Exclusive agents Business FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17
Insurance GWP
1 See footnote 1 on slide 22.
© Zurich
2 As of FY-17 Eastern expansion states include Connecticut, Georgia, Maryland, New Jersey, New York, and Pennsylvania.
July 2018 Investors' intro pack 2018 27Investment and Capital Management
INVESTMENT AND CAPITAL MANAGEMENT
ALM-focused and lower risk strategy delivering consistent
and sustainable excess returns
ASSET ALLOCATION ASSET QUALITY DURATION
FY-17 total Group investments of USD 207bn FY-17 Group debt investments of USD 163bn As of FY-17, for fixed income investments only (#years)
3% 7% 4% 9.6
5% 1% 8.7
2% 27%
5%
25%
4.5 4.3
17% 25%
79%
Life P&C
Fixed income Equities AAA BBB
Mortgages Hedge funds, AA Non-investment
Assets Liabilities
Private equity grade
Real estate Cash A Unrated
© Zurich
July 2018 Investors' intro pack 2018 29INVESTMENT AND CAPITAL MANAGEMENT
Managing our risks conservatively to AA financial strength
GROUP SOLVENCY CAPITAL MANAGEMENT POLICY (Z-ECM RATIO, %)
240%
217% 216%
204%
196%
200% 189%
185% >140% Mitigating actions required
120%-140% Mitigating actions considered
160%
120%-
132% 140%
127% 125% 100%-120% Target range
122% 121%
120% 114%
133%
at Q1-182 90%-100% Within tolerance level on temporary basis
100%-
120%
80%INVESTMENT AND CAPITAL MANAGEMENT
Solvency ratios resilient to market movements
Z-ECM SENSITIVITY IMPACT1,2 SST SENSITIVITY IMPACT1,2
Actual value as of FY-17 132% Actual value as of FY-17 216%
Interest rate +100 bps 136% Interest rate +100 bps 223%
Interest rate -100 bps 121% Interest rate -100 bps 195%
USD appreciation +10% 135% USD appreciation +10% 221%
Equities +20% 136% Equities +20% 222%
Equities -20% 128% Equities -20% 209%
Credit spreads +100 bps3 116% Credit spreads +100 bps3 189%
CS excl. Euro sovereign +100 bps3 121% CS excl. Euro sovereign +100 bps3 197%
1 Sensitivities are best estimate and linear, i.e. will vary depending on prevailing market conditions at the time. Z-ECM is calibrated at 99.95% Value at Risk (equivalent to an ‘AA’ rating); SST is
calibrated at 99.0% Expected Shortfall.
© Zurich
2 The impact of the changes to the required capital is approximated and takes into account market and insurance risks.
3 Credit Spreads (CS) include mortgages and including/excluding Euro sovereign spreads. Z-ECM sensitivity is net of profit sharing with policyholders.
July 2018 Investors' intro pack 2018 31INVESTMENT AND CAPITAL MANAGEMENT
Proven balance sheet flexibility through leverage
and coverage at Aa levels
GROUP CAPITAL STRUCTURE1 MOODY’S LEVERAGE & COVERAGE
Financial leverage: Aa = 15-30%
12% 11% 9% 9% 26.9% 26.4%
13%
24.3% 24.1% 23.7%
13% 14% 19% 16%
14%
Earnings coverage: Aa = 8-12x
72% 76% 76% 73% 75% 9.1 9.5 9.2 9.3
6.7
2013 2014 2015 2016 2017 2013 2014 2015 2016 20172
Senior debt Subordinated Debt Shareholders Equity
© Zurich
1 Capital Structure shown using accounting view.
2 Estimated by Zurich.
July 2018 Investors' intro pack 2018 32INVESTMENT AND CAPITAL MANAGEMENT
Low cost of risk and balanced maturity profile
CDS SPREAD AMONG BEST OF PEERS (USDm)1 BALANCED REFINANCING NEEDS (USDbn)2
600 3.0
2.5
2.2
2.1
400 2.0 0.2
0.6
1.7
1.5 1.3 0.5
1.0 1.0
200 1.0 0.8 1.9
0.7 1.6
0.5 1.2
0.5 0.3
0.3 0.3
0.5 0.4
0.0
0 0.0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Zurich Axa Generali Allianz Senior Subordinated
© Zurich
1 5yEUR sub CDS; source: Bloomberg.
2 As of Q2 2018; maturity profile based on first call date for subordinated debt and maturity date for senior debt.
July 2018 Investors' intro pack 2018 33INVESTMENT AND CAPITAL MANAGEMENT
We have a strongly cash generative business reflected
in high cash remittance
NET INCOME AND REMITTANCES 2012-20171 (USD)
P&C LIFE FARMERS NON-CORE GFO2 GROUP
NIAS
2012-17 12.0bn 6.2bn 6.3bn 0.3bn -4.9bn 19.9bn
REMITTED
2012-17 12.5bn 4.4bn 6.6bn 1.0bn
Ø PAYOUT 104% 71% 103% nm 95%
2017 – 2019 ~90% ~70% ~90% ~90% ~85%
© Zurich
1 Based on 2012-17 reporting structure.
2 Group Functions and Operations.
July 2018 Investors' intro pack 2018 34INVESTMENT AND CAPITAL MANAGEMENT
We are focused on continuing to reward our shareholders
ZURICH’S DIVIDEND POLICY DIVIDEND PER SHARE (CHF)
NIAS payout ratio of approximately 75%
18
17 17 17 17 17 17 17
Dividend increases based 15
16
on sustainable earnings growth 11
Target minimum of prior year dividend
per share 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20171
Dividend USD/CHF1 EUR/CHF1
© Zurich
1 Based on exchange rates around respective dividend payment dates.
July 2018 Investors' intro pack 2018 35INVESTMENT AND CAPITAL MANAGEMENT
Long term value creation, driven by consistent dividend policy
200%
150%
100%
50%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
STOXX Europe 600 Insurance Zurich Insurance Group
© Zurich
Source: Thomson Reuters
July 2018 Investors' intro pack 2018 36Appendix
INVESTMENT AND CAPITAL MANAGEMENT
Z-ECM and SST are more conservative than Solvency II
PRIMARY DIFFERENCES – REQUIRED CAPITAL
Most onerous Z-ECM SST1 Solvency II (Pillar 1)
impact on ratio
VaR 99.95% (~AA) ES 99% (~BBB) VaR 99.5% (~BBB),
RISK MEASURE
usually < ES 99%
• Market Risk (including • Market Risk (including Internal model (ZIP): Standard Formula
investment credit) investment credit) • Market Risk (including (all other entities):
• Premium and Reserve Risk • Premium, Reserve and UPR Risk investment credit) • Market risk
• NatCat Risk • NatCat Risk • Premium, Reserve and UPR • Counterparty default risk
• Life Liability Risk • Life Liability Risk Risk • Life underwriting risk
RISK-TYPES COVERED • Business Risk • Life Business Risk • NatCat Risk • Health underwriting risk
• Operational Risk • Reinsurance Credit Risk • Business Risk • Non-life underwriting risk
• Reinsurance Credit Risk • Receivables Credit Risk • Operational Risk (including premium, reserve
• Reinsurance Credit Risk and NatCat)
• Receivables Credit Risk • Intangible asset risk
• Scenarios • Operational risk
No concept of equivalence, ZECM Possibility to use local regimes for subsidiaries in equivalent third
EQUIVALENCE applied to the entire Group countries. Not applicable for Zurich
© Zurich
1 Regarding Swiss Solvency Test (SST) ratio see footnote on slide 3.
July 2018 Investors' intro pack 2018 38INVESTMENT AND CAPITAL MANAGEMENT
Z-ECM and SST are more conservative than Solvency II
PRIMARY DIFFERENCES – YIELD CURVES AND TRANSITIONALS
Most onerous Z-ECM / SST1,2 Solvency II (Pillar 1)
impact on ratio
BASE RISK-FREE Swaps Swaps
YIELD-CURVE
ENTRY-POINT TO Use all available market data CHF: 25 years
EXTRAPOLATION CHF: 30 years EUR: 20 years
OF YIELD-CURVE EUR, USD, GBP: 50 years
USD, GBP: 50 years
ULTIMATE Flat extrapolation from last observable data point CHF: 3.2% (as of December 31, 2017)
FORWARD RATE EUR, USD, GBP: 4.2% (as of December 31, 2017)
None (no liquidity premium) -10bps (credit)
+ volatility adjustment (between 9 bps (CHF) and 78bps (USD) at Q4-16)
ADJUSTMENTS
TO YIELD-CURVE + matching adjustment (currently not used by Zurich)
n/a Various transitional measures, especially for yield-curves and technical
TRANSITIONAL provisions, lasting until 2032. Zurich does not make use of these.
REQUIREMENTS
© Zurich
1 Regarding Swiss Solvency Test (SST) ratio see footnote on slide 3.
2 We applied for usage of our own yield curves in the SST, which was granted by FINMA subject to certain conditions.
July 2018 Investors' intro pack 2018 39INVESTMENT AND CAPITAL MANAGEMENT
Z-ECM and SST are more conservative than Solvency II
PRIMARY DIFFERENCES – OTHER KEY ELEMENTS
Most onerous Z-ECM SST1 Solvency II (Pillar 1)
impact on ratio
Available Capital Liability Liability
SENIOR DEBT
Pre-tax Pre-tax Post-tax
TAX
Management view Legal entity view Legal entity view
• Internal reinsurance not relevant • Internal reinsurance considered • Internal reinsurance considered
• Full Group diversification taken into • Only legal entity diversification taken into • Only legal entity diversification taken into
GRANULARITY account and allocated back to business account account
units • Risk of subsidiaries included (with limited
liability)
Risk Margin as part of insurance liabilities Risk Margin as part of insurance liabilities Risk Margin as part of insurance liabilities
RISK MARGIN
© Zurich
1 Regarding Swiss Solvency Test (SST) ratio see footnote on slide 3.
July 2018 Investors' intro pack 2018 40Disclaimer
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’). Forward-looking statements include statements regarding the Group’s targeted
profit, return on equity targets, expenses, pricing conditions, dividend policy and underwriting and claims results, as well as statements regarding the Group’s understanding
of general economic, financial and insurance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their
nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and plans and objectives of
Zurich Insurance Group Ltd or the Group to differ materially from those expressed or implied in the forward looking statements (or from past results). Factors such as
(i) general economic conditions and competitive factors, particularly in key markets; (ii) the risk of a global economic downturn, in the financial services industries in particular;
(iii) performance of financial markets; (iv) levels of interest rates and currency exchange rates; (v) frequency, severity and development of insured claims events; (vi) mortality
and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes in laws and regulations and in the policies of regulators may have a direct bearing on the
results of operations of Zurich Insurance Group Ltd and its Group and on whether the targets will be achieved. Zurich Insurance Group Ltd undertakes no obligation to
publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise.
All references to ‘Farmers Exchanges’ mean Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and their subsidiaries and affiliates. The three
Exchanges are California domiciled interinsurance exchanges owned by their policyholders with governance oversight by their Boards of Governors. Farmers Group, Inc. and
its subsidiaries are appointed as the attorneys-in-fact for the Farmers Exchanges and in that capacity provide certain non-claims administrative and management services to the
Farmers Exchanges. Neither Farmers Group, Inc., nor its parent companies, Zurich Insurance Company Ltd and Zurich Insurance Group Ltd, have any ownership interest
in the Farmers Exchanges. Financial information about the Farmers Exchanges is proprietary to the Farmers Exchanges, but is provided to support an understanding of the
performance of Farmers Group, Inc. and Farmers Reinsurance Company.
It should be noted that past performance is not a guide to future performance and that interim results are not necessarily indicative of full year results.
Persons requiring advice should consult an independent adviser.
This communication does not constitute an offer or an invitation for the sale or purchase of securities in any jurisdiction.
THIS COMMUNICATION DOES NOT CONTAIN AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES; SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION, AND ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE BY MEANS OF
A PROSPECTUS THAT MAY BE OBTAINED FROM THE ISSUER AND THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE COMPANY AND MANAGEMENT, AS WELL AS
FINANCIAL STATEMENTS.
© Zurich
July 2018 Investors' intro pack 2018 41Investing into Zurich
SIX SWISS EXCHANGE US AMERICAN DEPOSITARY RECEIPT PROGRAM
• Listing: SIX Swiss Exchange, Switzerland • Depository: The Bank of New York Mellon
• Product type: Swiss Blue Chip Shares • Nature: ADR
• Ticker symbol: ZURN • Symbol: ZURVY
• Swiss security number (Valorennummer): 1107539 • For further information:
• ISIN: CH0011075394
• Bloomberg symbol: ZURN VX Equity in the USA +1-888-BNY-ADRS
outside the USA +1 201 680 6825
• Reuters symbol: ZURN.VX
E-mail shrrelations@bnymellon.com
• Trading currency: CHF Website www.adrbnymellon.com
© Zurich
July 2018 Investors' intro pack 2018 42For further information
CALL US VISIT OR FOLLOW US
Investor Relations
Richard Burden +41 44 628 96 40
Francesco Bonsante +41 44 628 00 68
Samuel Han +41 44 625 32 57
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 Heina +41 44 625 38 44 Follow us
Phone +41 (0) 44 625 22 99
investor.relations@zurich.com
© Zurich
July 2018 Investors' intro pack 2018 43CALENDAR: • August 9, 2018, Half year results 2018 • September 6-7, 2018, UBS Best of Switzerland Conference 2018, Opfikon-Glattbrugg • September 25-26, 2018, Bank of America Merrill Lynch Conference 2018, London • November 8, 2018, Update for the nine months ended September 30, 2018 • December 5, 2018, Investor Day 2018 © Zurich Insurance Company Ltd
You can also read
