Half year results Investor & Media presentation August 6, 2015 Zurich Insurance Group

Transcription

1 Half year results 05 Investor & Media presentation August 6, 05 Zurich Insurance Group

2 Results overview Martin Senn, Chief Executive Officer

3 Key financials ROE below target, strong Z-ECM and cash remittances HY-5 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD BOP USD.bn (-5%) BOPAT ROE HY-5 Target.6% - 4% Z-ECM Q-5 Target 0% 00 0% NIAS USD.bn (-3%) Net cash remittances FC FY-5 Cumulative 3-year target > USD 3.5bn > USD 9bn Business operating profit after tax return on equity (annualized), excluding unrealized gains and losses. Zurich Economic Capital Model (Z-ECM). August 6, 05 Half year results 05 3

4 Report card Group Clear priorities for next 8 months GROUP STRATEGY HY-5 KEY ACTIONS PRIORITIES Prioritizing investment in distinctive positions Investments in corporate, commercial and select retail markets Continue investments in NAC and Global Corporate / CLP Targeted investments in select retail markets Managing other businesses for value GI turnarounds progressing In-force initiatives in maximize value life markets gaining traction Exit from UK annuity book Complete the work on GI turnarounds Next phase of in-force initiatives in manage for value life markets Extract capital from some blocks of business 3 Growing our operating earnings Efficiency initiatives launched, with aim of reducing costs by at least USD bn by end of 08 Deliver on USD 300m cost saving target by end of 06 Address underperforming GI portfolios August 6, 05 Half year results 05 4

5 Report card General Insurance Further actions required on underperforming portfolios PRIORITY MARKETS MANAGE FOR VALUE GWP (USDm) 9,995,83,540,798 5,46 8,400 0,5,75,694 3,049 5,460 8,557 BOP (USDm), , ,59,034 Actions in South Africa starting to show progress, with a 9ppt improvement in underlying LR in H Numerous actions underway in Brazil, new CEO for Latin America region appointed NEXT STEPS HY-4 HY-5 Other Continue as is Retail Corporate Commercial HY-4 HY-5 Other Turnaround / Exit Continue as is Priority Continue investments in NAC, Global Corporate and select retail markets Complete the work on GI turnarounds Address underperforming property portfolios and further actions to reduce expense base All figures calculated at constant HY-4 exchange rates. August 6, 05 Half year results 05 5

6 Report card Global Life On track to deliver BOP improvement PRIORITY MARKETS (USDm) MANAGE FOR VALUE APE, , NBV BOP Exit of annuity book in UK Starting to see BOP uplift from in-force management actions NEXT STEPS 893,09 78 HY-4 HY-5 HY-4 Emerging Markets Growth 8 HY-5 HY-4 Bank Joint Ventures -9 HY-5 Expand in-force management initiatives to include Ireland and Isle of Man Implement efficiency improvements Address emerging markets profitability Developed Markets Growth Manage for Value All figures calculated at constant HY-4 exchange rates. August 6, 05 Half year results 05 6

7 Report card Farmers Exchanges Continued progress in strategic execution NET PROMOTER SCORE RETENTION % 75.9% 76.8% 77.3% 77.4% HY-4 9m-4 FY-4 Q-5 HY-5 Q-4 Q3-4 Q4-4 Q-5 Q-5 NET GAIN / LOSS OF AGENTS 4 NEW BUSINESS COUNT GROWTH % % 6.8% 0.5%.4% Q-4 Q3-4 Q4-4 Q-5 Q-5 Q-4 Q3-4 Q4-4 Q-5 Q-5 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 administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services. Survey based measure of customer loyalty (for Farmers Auto and Farmers Home only). Figures are reported on a YTD basis. 3 Reflects rolling 3-month 3/ survival rate for Farmers Exchanges, based on trailing -month weighted average GWP. 4 Change in total number of exclusive Farmers agents including full time and career agents. 5 Quarterly YoY change in new business counts for all books of business. Farmers and Bristol West Auto reflects New Business/New Household. August 6, 05 Half year results 05 7

8 Key messages General Insurance Combined ratio of 00% for Q and 98.3% for H; actions under way to deliver on 06 targets Global Life Good growth in APE and BOP, at constant currency Farmers Continued progress in strategic execution Cash remittance Cash remittance expected for full year >USD 3.5bn, and >USD 0bn in August 6, 05 Half year results 05 8

9 Financial highlights George Quinn, Chief Financial Officer

10 Group Business operating profit Lower operating result due to higher GI combined ratio BOP BY SEGMENT (USDm) BOP/NIAS RECONCILIATION (USDm),40-4% % tax rate 840 Q-3 Q-4 Q-5 Q-5 BOP RCG Accounting and restr costs 3 SH Taxes 4 Other 5 Q-5 NIAS General Insurance Global Life Farmers OOB NCB Non-controlling interests 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. Realized capital gains/losses. 3 Includes impairments of goodwill, restructuring provisions and other restructuring charges. 4 Shareholder taxes (income tax expense attributable to shareholders). 5 Includes change in estimate of earn-out liabilities. August 6, 05 Half year results 05 0

11 General Insurance Topline Growth impacted by timing and market pressure GWP GROWTH IN LC (%) RATE CHANGE (%) Q-4 Q-5 Q-5 GC -0% % 4% % % -% NAC -% 5% 5% % % % EMEA -4% 0% % % % % IM -5% % % 3% 6% 4% Total 3 0% 3% 6% % % % Q-5 Q-4 Q-3 In local currency. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 3 Total includes GI Global Functions, Group Reinsurance and Eliminations. August 6, 05 Half year results 05

12 General Insurance Combined ratio AY CR impacted by large losses and higher expenses COMBINED RATIO SPLIT (%) COMBINED RATIO BY REGION (%) 99.% 5.8% 95.6%.3% 00.0% 3.4% GC 97.5% 06.5% NAC 97.4% 95.7% 97.5% 93.4% 97.9% EMEA 93.6% 97.7% IM 0.4% 99.9% -4.% Q-3-0.% Q-4 -.3% Q % Total 95.6% 80% 85% 90% 95% 00% 05% 0% Catastrophes AY CR (excl. catastrophes) 3 PYD Q-5 Q-4 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. Catastrophes includes major and mid-sized catastrophes, including significant weather related events. 3 Accident year combined ratio (AY CR) excludes prior year reserve development (PYD). August 6, 05 Half year results 05

13 General Insurance BOP components Decline in BOP due to lower underwriting result BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) 80-43% Q-3 Q-4 Q-5 Q-4 UWR Investment Income RCG NTR NCI Q-5 Underwriting result Investment inc. / Realized capital gains (RCG) Non-technical result (NTR) Non-controlling interest (NCI) 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. August 6, 05 Half year results 05 3

14 Global Life New business Strong APE growth in Europe, NBV impacted by low yields APE (USDm),4 NBM & NBV,,4 NET INFLOWS 3 & AUM 8, %,7, NBM (%) 7.6. NBV (USDm) % Net inflows (USDbn) AuM (USDbn) -6% Q-3 Q-4 Q-5 Q-3 Q-4 Q-5 Q-3 Q-4 Q-5 3rd party investments Other APAC North America Latin America EMEA Group investments Unit-linked APE is reported before non-controlling interests. NBM and NBV are reported net of non-controlling interests. 03 and 04 figures have been restated to reflect a change in the MCEV CRNHR methodology net policyholders flows did not include inflows for certain short-duration contracts and 04 restated to reflect the change in regional structure from Europe/APME to EMEA/APAC. August 6, 05 Half year results 05 4

15 Global Life BOP by region Discrete quarter BOP increased 9% at constant currency BOP BY REGION (USDm) KEY DRIVERS (USDm) % Q-3 Q-4 Q-5 Q-4 EMEA Latin America North America APAC Other Q-5 Other APAC North America Latin America EMEA 03 and 04 restated to reflect the change in regional structure from Europe/APME to EMEA/APAC. August 6, 05 Half year results 05 5

16 Global Life BOP Growth in local currency revenues and new business investment BOP BY SOURCE OF EARNINGS (USDm) REGIONAL BOP & KPI (USDm) D HY-4 Loadings & fees, ,964 8% nm -3% -7% % -73% 443 Inv. margin % 00 9 Technical margin 664 3% -0 Operating costs % US LATAM EMEA APAC OTHER Acquisition costs -,506-8% Revenues Expenses Deferral impacts 8 5% KPI HY-4 HY-5 As a % of UL fund based fees 0.7% 0.6% Average UL AuM HY-5 BOP 673 Germany discretionary dividends Premium & other fees UL fund based fees Other loadings 3% % GWP & Deposits Investment margin 0.8% 0.7% Average NL reserves Operating costs 0.8% 0.8% Average reserves Acquisition costs 76% 69% APE Adjusted for distorting impacts Refer to Global Life Source of earnings briefing document for details; HY-4 deltas at constant FX. Excluding German discretionary dividends. 4% August 6, 05 Half year results 05 6

17 Farmers Exchanges KPIs Top-line recovery continues, lower cat losses vs prior years GWP GROWTH (%) COMBINED RATIO (%) 3 SURPLUS 4 (USDbn).4%.3%.9%.7% 6.% 08.3%.9% 04.8% 0.0% 36.7% % 37.% % 95.5% 95.4% 94.8% % Q-4 Q3-4 Q4-4 Q-5 Q-5 Q-3 Q-4 Q-5 HY-4 FY-4 HY-5 Catastrophe losses CR (excl. catastrophe losses) Surplus ratio Farmers Exchanges surplus Farmers Reinsurance Co. surplus 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 administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services. Adjusting for a one-time accounting change growth was.9% in Q Before quota share treaties with Farmers Reinsurance Company, Zurich Insurance Company Ltd and a third party reinsurer. 4 Surplus ratio excludes surplus of Farmers Reinsurance Company. August 6, 05 Half year results 05 7

18 Farmers KPIs Margin in line with expectations BOP (USDm) MGEP MARGIN (%) FARMERS RE CR (%) % 7.4% 7.0% 0.4% 5.0% 05.5% 03.9%.4% 9.% % 93.% 94.8% Q-3 Q-4 Q-5 Q-3 Q-4 Q-5 Q-3 Q-4 Q-5 FMS FRe Catastrophes 3 CR (excl. catastrophes) Margin on gross earned premiums of the Farmers Exchanges. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc. (or Farmers Management Services (FMS)), a wholly owned subsidiary of the Group, provides administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services. Farmers Re (FRe) business includes all reinsurance assumed from the Farmers Exchanges by the Group (i.e. Farmers Reinsurance Company and Zurich Insurance Company Ltd). 3 As defined by the Quota Share reinsurance treaties. August 6, 05 Half year results 05 8

19 Group Balance sheet and capital Continued strong solvency position SHAREHOLDERS EQUITY (USDm) SOLVENCY RATIOS (%) 35,40 7% 5% 96% -, , ,883 7% 6% % 0% Q-5 Dividend NIAS Net URG/L CTA Pension (excl. plans & dividend) other HY-5 Z-ECM SST 3 FY-3 HY-4 FY-4 Q-5 Dividend as approved by the Annual General Meeting on April, 05, and at transaction day exchange rates. Dividend at historical exchange rates amounts to USD,683m, with the difference of USD,0m reflected in the cumulative foreign currency translation adjustment (CTA). Includes share-based payments transactions, issuance of share capital and other. 3 The Swiss Solvency Test (SST) ratio is calculated based on the Group s internal model, and both are subject to the review and approval of the Group s regulator, the Swiss Financial Market Supervisory Authority (FINMA). The ratio is filed with FINMA bi-annually. August 6, 05 Half year results 05 9

20 Group Free capital generation Strong free capital generation in FREE CAPITAL GENERATION (USDbn) General Insurance, Farmers, Non-Core and OOB IFRS NIAS Accounting differences Local statutory oper. earnings Vol. rel. changes in req. capital FCG 0.6. Global Life.0 Free surplus generation -.4 New business reinvestment 0.6 Expected free surplus generation -0.3 Expense and other variance 0.3 Other operating variances 0.6 Operating FCG Operating FCG Non-Operating items General Insurance Farmers NCB OOB Global Life August 6, 05 Half year results 05 0

21 Group Net cash remittances Very strong conversion of IFRS earnings to FCG and cash BOPAT (USDbn) OPERATING FCG (USDbn) CASH REMITTANCES (USDbn) > FY-3 FY-4 FY-3 FY-4 FY-3 FY-4 FC FY-5 General Insurance Global Life Farmers NCB OOB Estimated full year 05 cash remittances, subject to change. August 6, 05 Half year results 05

22 Key messages General Insurance Combined ratio of 00% for Q and 98.3% for H; actions under way to deliver on 06 targets Global Life Good growth in APE and BOP, at constant currency Farmers Continued progress in strategic execution Cash remittance Cash remittance expected for full year >USD 3.5bn, and >USD 0bn in August 6, 05 Half year results 05

23 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 ). 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 August 6, 05 Half year results 05 3

24 Appendix

25 GI HY-5 Combined ratio AY CR impacted by large losses and higher expenses COMBINED RATIO SPLIT (%) COMBINED RATIO BY REGION (%) 98.% 3.7% 95.7%.% 98.3%.4% GC 95.% 0.0% NAC 96.4% 96.3% 96.7% 94.5% 97.3% EMEA IM 97.% 94.% 0.0% 99.9% Total 98.3% 95.7% -.3% HY-3-0.9% HY-4 -.4% HY-5 80% 85% 90% 95% 00% 05% Catastrophes AY CR (excl. catastrophes) 3 PYD HY-5 HY-4 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. Catastrophes includes major and mid-sized catastrophes, including significant weather related events. 3 Accident year combined ratio (AY CR) excludes prior year reserve development (PYD). August 6, 05 Half year results 05 5

26 GI Combined ratio details Uptick in AY loss ratio and expense ratio LOSS RATIO (%) EXPENSE RATIO (%) 68.3% 3.% 66.4%.3% 66.9%.4% 69.4% 5.8% 65.9%.3% 68.4% 3.4% 9.7% 3.5% 30.5% 3.7% 3.5% 4.0% 9.7% 3.4% 9.7% 3.% 3.6% 4.% 67.5% 65.% 65.9% 67.8% 63.7% 66.3% -.4% -.% -.4% -4.% -0.% -.3% 6.% 6.9% 7.5% 6.3% 6.6% 7.5% FY-3 FY-4 HY-5 Q-3 Q-4 Q-5 FY-3 FY-4 HY-5 Q-3 Q-4 Q-5 Catastrophes AY LR (excl. catastrophes) PYD Commissions Other technical expenses 3 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. Catastrophes includes major and mid-sized catastrophes including significant weather related events. 3 Includes the amortization costs of upfront payments for distribution agreements. August 6, 05 Half year results 05 6

27 GI Loss ratio details LR impacted by higher attritional but also cat losses LOSS RATIO (%) 69.4% 67.7%.6% 5.8% 67.4% 3.7% 68.6%.7% 65.7%.9% 65.9%.3% 65.8% 3.0% 68.% 68.4%.9% 65.3%.4% 3.4% 66.4% 67.8% 66.8% 68.9% 65.6% 63.7% 64.4% 67.0% 65.4% 66.3% -0.3% -4.% -3.% -.0% -.8% -0.% -.6% -0.8% -.5% -.3% Q-3 Q-3 Q3-3 Q4-3 Q-4 Q-4 Q3-4 Q4-4 Q-5 Q-5 Catastrophes AY LR (excl. catastrophes) PYD 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in was not restated. Catastrophes includes major and mid-sized catastrophes including significant weather related events. August 6, 05 Half year results 05 7

28 GI Global Corporate KPIs Modest growth, CR impacted by higher large and cat losses HY-5 KEY FINANCIALS USD 48m USD 4m GWP Growth Zurich rate change 3 Combined Ratio 95.%.8% 0.0% 3.3% % KEY DRIVERS 0% 0% BOP 73.4% 77.7% HY-4 HY-5 Expense ratio Loss ratio Modest growth reflecting continued market pressure, particularly in North America Flat rate increase, with main pressure in property lines in North America and across all lines in APAC AY CR benefitting from improved attritional loss ratio, but impacted by higher large and catastrophe losses and an uptick in expense ratio 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in 05. In local currency. 3 GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. August 6, 05 Half year results 05 8

29 GI North America Commercial KPIs Modest growth, combined ratio flat HY-5 KEY FINANCIALS USD 469m USD 469m GWP Growth Zurich rate change Combined Ratio 96.3% 96.4% 3% % 96% 30.8% 3.% 65.5% 64.% HY-4 HY-5 BOP Expense ratio Loss ratio KEY DRIVERS Modest growth with continued execution of strategic growth initiatives and increase in retentions Market pressure on rates, especially in property lines and workers comp Combined ratio flat with increases in the AY LR ex-cat and ER offset by lower catastrophes and higher favorable prior year reserve releases In local currency. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. August 6, 05 Half year results 05 9

30 GI EMEA KPIs Combined ratio impacted by large losses and one-offs HY-5 KEY FINANCIALS USD 69m USD 46m GWP Growth Zurich rate change 3 Combined Ratio 94.% 97.% 0% % 97% BOP 30.% 3.5% 64.% 65.8% HY-4 HY-5 Expense ratio Loss ratio KEY DRIVERS % growth excluding Russia Retail 4, expansion in Switzerland, Germany and Spain, offset by declines in UK and Italy Continued low single digit rate increases in most markets Combined ratio higher but mainly driven by higher large losses in the UK and one-off items in the expenses 04 restated for the transfer of certain General Insurance business to Non-Core Business (NCB) in 05. In local currency. 3 GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 4 Zurich s Russia Retail business was sold in Q4-4. August 6, 05 Half year results 05 30

31 GI International Markets KPIs Lower AY loss ratio offset by higher expenses HY-5 KEY FINANCIALS USD 97m USD 7m GWP Growth Zurich rate change Combined Ratio 99.9% 0.0% % 5% 0% 40.7% 43.% 59.% 57.8% HY-4 HY-5 BOP Expense ratio Loss ratio KEY DRIVERS Growth mainly driven by the new extended warranty distribution agreement in Brazil Higher rate increases due to actions to improve profitability in Latin America Increase in expenses is driven by the amortization of the upfront payment for the new distribution agreement in Brazil; AY LR improvement despite catastrophes in Australia, but still more required In local currency. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. August 6, 05 Half year results 05 3

32 GI Rate change monitor Increased pricing pressure across the globe Q-5 ZURICH RATE CHANGE ASSESSMENT Business Group Global Corporate North America Commercial EMEA UK Germany Switzerland Italy Spain International Markets Assessment Moderate rate increases, below prior year levels with market pressure, particularly in US property lines and across our Global Corporate markets, Australia and UK. Competitive market conditions, particularly in the US. Rates in Asia Pacific and in property lines of business were negative. Continued small positive rate increases, although market conditions are challenging in property and workers compensation lines. Fairly stable rate increases, albeit slightly below our expectations and with different local market dynamics. Rate increases in all lines of business except property, lower than prior year. Rate increases in our main lines, overall broadly in line with expectations. Renewal rates broadly flat, with pressure on motor rates. Overall reductions, with pressure on motor rates due to high market profitability. Solid rate increases, ahead of prior year, mainly in motor. Increases in APAC, but below prior year levels, particularly in Australia. Strong rate increases in Latin America are consistent with prior quarter. August 6, 05 Half year results 05 3

33 GI Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES (USDm) Single global USD 50m treaty, which can be applied to any region Single global USD 500m treaty, which can be applied to any region Europe all perils US windstorms NA earthquakes Rest of World all perils Combined global cat treaty Global cat treaty Regional cat treaties Retention % of co-participation GLOBAL AGGREGATE CAT TREATY Reinsurance indemnification in excess of fixed retention ,050,300,450 All cat losses exceeding USD 5m Global aggregate cat treaty Combined global cat treaty % of co-participation US Cat Treaty and Global Aggregate Cat Treaty renewed on January, 05; Europe Cat Treaty and Global Cat Treaty renewed on April, 05; and International Cat Treaty renewed on July, 05. This USD 50m cover is the same combined global occurrence / aggregate treaty presiding over the global catastrophe treaty. This cover can be used only once, either for aggregated losses or for an individual event. August 6, 05 Half year results 05 33

34 GL New business by pillar NBV impacted by interest rate reductions and product mix effects Q-5 KEY FINANCIALS, APE (USDm),7,5, NBM 8.7% PVNBP USD.9 bn CLP single premium USD.5 bn Q-3 Q-4 Q-5 KEY DRIVERS NBV (USDm) Q-3 Q-4 Q-5 Corporate Life & Pensions Other retail Bank Distribution CLP protection and pensions APE increased, particularly in the UK and Switzerland, with overall lower margin Bank APE negatively impacted by FX effects, most notably from the devaluation of the Brazilian Real Other retail APE down in North America and Latin America partially offset by Europe with increasing volumes on the UK Retail Platform NBV further impacted by overall lower margins due to product mix effects and low interest rates APE is reported before non-controlling interests. NBM and NBV are reported net of non-controlling interests. 03 and 04 NBV figures have been restated to reflect a change in the MCEV CRNHR methodology. August 6, 05 Half year results 05 34

35 GL Net inflows & Assets under management Higher net inflows and asset growth offset by currency impacts NET INFLOWS BY REGION (USDbn), AUM DEVELOPMENT (USDbn) HY-3 HY-4 HY-5 Balance as of Jan, 05 Net inflows Market movements and other FX Balance as of June 30, 05 Other APAC Latin America North America EMEA 3rd party investments Group investments Unit-linked In 03 net policyholders flows did not include inflows for certain short-duration contracts. 03 and 04 restated to reflect the change in regional structure from Europe/APME to EMEA/APAC. August 6, 05 Half year results 05 35

36 GL North America Key financials Slight deterioration in BOP, adjusted for distorting impacts BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-4 Loadings & fees % 60 Inv. margin -47% Technical margin 80 4% Operating costs -66 5% HY-3 HY-4-4 HY-5 Acquisition costs -59 0% NBV BOP Cash Remittance Deferral impacts 38-6% KPI HY-4 HY-5 As a % of UL fund based fees 0.% 0.% Average UL AuM HY-5 BOP 00-4% Other loadings 4% 8% GWP & Deposits Investment margin 0.7% 0.4% Average NL reserves Operating costs.4%.9% Average reserves Premium & other fees UL fund based fees Acquisition costs 9% 8% APE Adjusted for distorting impacts refer to Global Life Source of earnings briefing document for details; HY-4 deltas at constant FX. Cash remittance received centrally including FY data. August 6, 05 Half year results 05 36

37 GL Latin America Key financials Local currency BOP growth BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-4 Loadings & fees % Inv. margin 6 6% Technical margin 0-9% Operating costs -08-3% HY-3 HY-4 HY-5 Acquisition costs -37 -% NBV BOP Cash Remittance Deferral impacts 0 nm KPI HY-4 HY-5 As a % of UL fund based fees 0.6% 0.5% Average UL AuM HY-5 BOP 4% Other loadings 6% 30% GWP & Deposits Investment margin 3.3% 3.4% Average NL reserves Premium & other fees UL fund based fees Operating costs.5%.4% Average reserves Acquisition costs 89% 04% APE Adjusted for distorting impacts refer to Global Life Source of earnings briefing document for details; HY-4 deltas at constant FX. Cash remittance received centrally including FY data. August 6, 05 Half year results 05 37

38 GL EMEA Key financials Strong growth in Loadings & fees and Technical margin BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-4 Loadings & fees ,57 5% 90 Inv. margin 4 35 Technical margin 390-0% % Operating costs -59-7% HY-3 HY-4 HY-5 Acquisition costs % NBV BOP Cash Remittance Deferral impacts 87 nm KPI HY-4 HY-5 As a % of UL fund based fees 0.7% 0.6% Average UL AuM HY-5 BOP 443 Operating costs 0.5% 0.6% Average reserves Germany discretionary dividends UL fund based fees Premium & other fees Acquisition costs 55% 47% APE Adjusted for distorting impacts refer to Global Life Source of earnings briefing document for details; HY-4 deltas at constant FX. Cash remittance received centrally including FY data. 3 Adjusted for German discretionary dividends. 7% Other loadings 8% 7% GWP & Deposits Investment margin 3 0.6% 0.6% Average NL reserves August 6, 05 Half year results 05 38

39 GL APAC Key financials Volume driven growth in fee and technical margins BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-4 Loadings & fees % Inv. margin 5-8% Technical margin 50 9% -0 Operating costs -80 -% HY-3-53 HY-4 HY-5 Acquisition costs % NBV BOP Cash Remittance Deferral impacts 57 HY-5 BOP 9 nm 8% KPI HY-4 HY-5 As a % of UL fund based fees.8%.7% Average UL AuM Other loadings 7% 8% GWP & Deposits Investment margin.0%.8% Average NL reserves Operating costs 3.% 3.4% Average reserves Premium & other fees UL fund based fees Acquisition costs 45% 5% APE Adjusted for distorting impacts refer to Global Life Source of earnings briefing document for details; HY-4 deltas at constant FX. Cash remittance received centrally including FY data. August 6, 05 Half year results 05 39

40 Global Life MCEV free surplus roll-forward Positive development offset by dividends and capital movements FREE SURPLUS DEVELOPMENT (USDm) ,696,7 Opening free surplus FY-4 Cash strain from new business net of NCI Expected transfer to free surplus Expected Expense contribution and other from inforce variances Other operating variances Economic & other nonoperating variances Dividends Injections Other capital movements Foreign currency translation effects Closing free surplus HY-5 August 6, 05 Half year results 05 40

41 Zurich Santander Quarterly results Continued growth offset in USD by adverse FX development PROFIT BEFORE TAX GI & LIFE (00%) INTANGIBLES AMORTIZATION (00%) Q-3 Q Q-5 Q-3 Q-4 Statutory profit before tax BOP before interest, depreciation and amortization Q-5 Distribution agreement PVFP MINORITY ADJUSTMENT (-49%) CORE SEGMENT BOP GI & LIFE (5%) Q-3 Q-4 Q-5 EARN-OUT & PPA ADJUSTMENTS (5%) 4 Q-3 Q-4 Q GI Life Q-3 Q-4 Q-5 August 6, 05 Half year results 05 4

42 Farmers Exchanges GWP Continued top-line recovery DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) +.% +.9% 9,335 9,57 4,760 4,848 4,03 4, %,06,4 3.0%,379,40 +.7%,305,33 +.0% ,6, % +7.8% 4.% -9.4% % +.0% +4.% -30.9% HY-4 HY-5 Q-4 Q-5 Auto Home EA Business Insurance Bristol West Specialty Other 3 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 administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services. Bristol West writes non-standard Auto business. Note that Specialty Auto has been moved to Auto from Bristol West as per Q4-4. Previous year figures have not been restated as the impact is relatively small. 3 Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. August 6, 05 Half year results 05 4

43 Farmers Exchanges PIF/VIF Policies in force returned to growth DEVELOPMENT OF PIF/VIF BY BUSINESS LINE (THOUSANDS) +0.4% +0.% 9,04 9,3 9,093 9,3 9,70 9, % 9,733 9, % 4,796 4, % 4,794 4, % 98, , % +0.3% +.8% -5.%,009, , % -.4%.% -8.% December 04 June 05 March 05 June 05 Auto Home EA Business Insurance Bristol West Specialty Other 3 Policies-in-force (PIF) or Vehicle-in-force (VIF) for Auto businesses. Bristol West writes non-standard Auto business. Note that Specialty Auto has been moved to Auto from Bristol West as per Q4-4. Previous year figures have not been restated as the impact is relatively small. 3 Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. August 6, 05 Half year results 05 43

44 Farmers Exchanges Combined ratio Auto and Bristol West CR impacted by unfavorable claim trends COMBINED RATIO BY BUSINESS LINE (%) Auto 03.5% 00.9% Auto 06.5% 04.% Home EA Business Insurance Bristol West Specialty 95.% 06.% 96.6% 0.8% 06.4% 0.0% 94.% 98.7% Home EA Business 96.3% Insurance 04.9% Bristol West 08.6% 00.3% Specialty 07.0% 8.5% 03.% 07.4% Other %.% 88.4% Other 3 9.0% Total 99.3% 0.4% Total 04.8% 08.3% HY-5 HY-4 Q-5 Q-4 Combined ratio is before quota share treaties with Farmers Reinsurance Company, Zurich Insurance Company Ltd and a third party reinsurer. Bristol West writes non-standard Auto business. Note that Specialty Auto has been moved to Auto from Bristol West as per Q4-4. Previous year figures have not been restated as the impact is relatively small. 3 Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. August 6, 05 Half year results 05 44

45 Farmers Exchanges Combined ratio history Q-5 catastrophe losses more benign than in previous years QUARTERLY COMBINED RATIO (%) Incl. California wildfires Incl. Ike & Gustav Incl. 7 Catastrophe Incl. Events 3 Catastrophe Events Incl. Irene Incl. 3 Catastrophe Events Excl. Fogel/SoT settlements Incl. 3 Catastrophe Events Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q Catastrophes impact Farmers Exchanges adopted industry standard ISO defined catastrophes as per July 0. August 6, 05 Half year results 05 45

46 Other Operating Businesses H&F benefitting from lower interest costs & FX one-offs QUARTERLY BOP SPLIT (USDm) Q-3 Q3-3 Q4-3 Q-4 Q-4 Q3-4 Q4-4 Q-5 Q-5 Headquarters Holding & Financing Includes Alternative Investments. August 6, 05 Half year results 05 46

47 Group Investments Asset allocation Zurich s sources of investment risk and return are balanced ASSET ALLOCATION RISK DIVERSIFICATION RISK DRIVERS,3 Total Group Investments: USD 97bn 4% 6% 4% % 5% 00% 7% 9% % 4% 4% 9% 5% 80% 50% Fixed income Mortgages Real estate Equities Hedge funds, PE 4 Cash Sum of single security risks Investment risks diversified Investment risk relative to liabilities Equity risk Interest rate risk Credit risk 5 RE risk 4 FX risk Specific risk Economic view. Estimated. 3 Risk drivers of Market risk (at Expected Shortfall 99% based on Monte Carlo simulation) show marginal contribution to the total Market risk. 4 PE = Private equity, RE = Real estate. 5 Credit risk consists of swap spread risk, credit spread risk and credit default risk. August 6, 05 Half year results 05 47

48 Group Investments Debt securities portfolio Debt securities portfolio is of a high quality BY CATEGORY BY RATING Total debt securities: USD 4bn 3% 4% % 0% 44% 43% 8% 36% Government and government related bonds MBS/ABS AAA AA A BBB Non-investment grade Corporate bonds MBS = Mortgage backed securities, ABS = Asset backed securities August 6, 05 Half year results 05 48

49 Group Investments Investment income yield Higher risk premium offset by lower yields and USD appreciation GENERAL INSURANCE GLOBAL LIFE GROUP Equity Debt Real estate Total (gross).%.03%.33%.%.8%.34%.4% Mortgage loans.7%.9%.3%.8%.34%.5% Total (net) 3.%.8%.64%.63%.8% Trade Yield at ~.4% Equity Debt Real estate Total (gross).95%.7%.9%.54%.73%.8%.70%.77%.85%.70% Mortgage loans.88%.95%.6%.77%.86%.55% Total (net) 3.70%.79% Trade Yield at ~.% Equity Debt Real estate Total (gross).54%.9%.39%.38%.5%.57%.64% Mortgage loans.8%.9%.46%.59%.6%.40% Total (net) 3.5%.55%.7%.86%.89% HY-5 HY-4 HY-3 Calculated based on the asset class average; not annualized; accounting view before eliminations. Calculated as a weighted average trade yield of purchased debt securities on an annual basis. 3 Net of investment expenses. August 6, 05 Half year results 05 49

50 Group Economic capital models Continued strong solvency position Z-ECM RATIO DEVELOPMENT (%) SST RATIO DEVELOPMENT (%) 3% 0% -3% 5% 5% -5% -8% % -% -% 0% -9% 0% 0% 0% 96% FY-4 Business profit Ins. Risk Market risk Market Model change changes Cap. mov., other Q-5 HY-4 Business profit Ins. Risk Market risk Market Model change changes Cap. mov., other FY-4 The Swiss Solvency Test (SST) ratio is calculated based on the Group s internal model, and both are subject to the review and approval of the Group s regulator, the Swiss Financial Market Supervisory Authority (FINMA). The ratio is filed with FINMA bi-annually. Insurance risk, capital movements and change in diversification benefit. August 6, 05 Half year results 05 50

51 Group Z-ECM components Well diversified capital base by risk type Q-5 AFR COMPOSITION (USDbn) RBC BY RISK TYPE AND BUSINESS Shareholders equity Dividend accrual % 8% 8% % 5% Market risk Re-ins credit risk P&R risk Natural cat risk Net intangibles 6 4% % Life insurance risk Operational risk Business risk VIF & RBC adjustments 7 Financial debt 0 9% 6% General Insurance Global Life Capital allocation to Farmers 35% 50% Farmers Other Available Financial Resources 40 Premium & reserving risk. Includes Other Operating Businesses and Non-Core Businesses. August 6, 05 Half year results 05 5

52 Group Solvency ratio sensitivities Solvency ratios resilient to market movements SOLVENCY RATIO IMPACT Actual value as of FY-4 Interest rate +00 bps Interest rate -00 bps Equities +0% Equities -0% % 6% 7% 6% 9% 96% 00% 90% 0% 9% Credit spreads +00 bps 3 08% 67% CS excl. Euro sovereign +00 bps 3 % 77% Z-ECM 4 SST 4 Sensitivities are best estimate and non-linear, i.e. will vary depending on prevailing market conditions at the time. They reflect recent model changes in Z-ECM. The impact of the changes to the required capital is approximated and only taken into account on Market risk. 3 Credit Spreads (CS) include mortgages and incl./excl. Euro sovereign spreads. Z-ECM sensitivity is net of profit sharing with policyholders. 4 Z-ECM: 99.95% Value at Risk; SST: 99.00% Expected Shortfall. August 6, 05 Half year results 05 5

53 Group EPS, BVPS and ROE calculations EPS AND BVPS (CHF) BOPAT ROE AND ROE (%) No., CHF FY-4 HY-5 Common shares issued 49.64m 50.40m Treasury shares.9m.5m Common shares outst m 49.5m WAvg for basic EPS 48.03m 48.76m Dilution impact.3m.5m WAvg diluted EPS 49.35m 50.00m NIAS (USDm) 3,949,059 Avg USD/CHF rate USDm, % FY-4 HY-5 SHE 34,735 3,883 Net URGL / CF hedges 4,374 3,405 Adj. SHE 30,36 8,478 Avg. adj. SHE 30,30 9,074 BOP 4,638,38 SH effective income tax rate 7.0% 4.5% BOP after tax 3,386,690 NIAS 3,949,059 Basic EPS Diluted EPS BVPS BOPAT ROE.%.6% NIAS ROE 3.0% 4.% Earnings per share (EPS), Book value per share (BVPS), Business Operating Profit after Tax (BOPAT), Shareholders equity (SHE), Unrealized gains/losses (URGL), Average (Avg), Weighted average (WAvg). Denominator is calculated as the sum of each quarterly average, divided by the number of quarters. HY-5 ROE calculations are annualized. 3 Based on common shares outstanding and end-period USD/CHF rates of.006 and.030. August 6, 05 Half year results 05 53

54 Group Currency impact Move in currency is mainly translational HY-5 KEY RESULTS KPI USDm reported at constant currency Group BOP,38-5% -0% NIAS,059-3% +% GWP 8,669-7% +3% General Insurance NEP 3,98-7% +% Net underwriting result 30-64% -66% Investment income 988-9% -% BOP,66-3% -7% APE,443 +3% +9% Global Life NBV 4-5% -5% BOP % +% OOB BOP % +% August 6, 05 Half year results 05 54

55 For further information CALL US VISIT OR FOLLOW US Investor Relations James Quin Aaron Beharelle André Meier Gianni Vitale Rating Agency Management Michèle Matlock Events Patricia Heina Download: Zurich Investors and Media App August 6, 05 Half year results 05 55

56 Calendar: - September 9 - October, BoAML Conference, London - November 5, Results for the nine months to September 30, 05 - February, 06, Annual Results 05 Zurich Insurance Company Ltd