CREATING LONG-TERM VALUE. December 2014

Transcription

1 CREATING LONG-TERM VALUE December 2014

2 Explanatory Note Today s presentation will contain forward-looking statements, both written and spoken, including as described in the Private Securities Litigation Reform Act of This means statements in prepared remarks as well as during question and answer sessions and general discussion. Forward-looking statements will include statements relating to our business operations and vision for ACE, the insurance industry, economic and insurance industry developments, our financial outlook, our use of capital, anticipated pricing and financial performance trends, competition, growth prospects, and acquisitions. The words believe, anticipate, estimate, should, plan, expect, intend, hope, feel, will likely result, and will continue, and variations thereof and similar expressions identify forward-looking statements -- but any statement other than statements of historical fact could be forward-looking. Forward-looking statements made by us or on our behalf reflect only our current views with respect to future events, circumstances and performance. You are cautioned not to place undue reliance on these forward-looking statements, and we undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise. Our forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors (some of which will be highlighted today but others of which are described in more detail in our SEC filings) include but are not limited to: developments in global financial markets, including changes in interest rates, currency exchange rates, stock markets, and other financial markets; increased government involvement or intervention in the financial services industry or ACE specifically; the cost and availability of financing; general economic and business conditions; losses arising out of natural or man-made catastrophes such as hurricanes, typhoons, earthquakes, floods, climate change or terrorism; actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent; capital constraints and capital flexibility reduction; the ability to collect reinsurance recoverable, credit developments of reinsurers, and changes in the cost, quality, or availability of reinsurance; actual loss experience from insured or reinsured events and the timing of claim payments; the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and latent injuries; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; corporate governance and corporate law issues including those affecting us as a Swiss company regulated in many jurisdictions; uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations and treaties, including tax-related; the actual amount of new and renewal business, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets, including regulatory constraints; the competitive environment in which we operate, including trends in pricing or in policy terms and conditions; acquisitions made by us performing differently than expected (or failing to close) and the impact of acquisitions on our pre-existing organization; and management s response to these factors and actual events. Moreover, today s presentations may contain reference to non-gaap financial measures. For a reconciliation of our commonly-used non-gaap financial measures, we refer you to our most recent earnings release and financial supplement, which are available on the ACE website ( under Investor Information.

3 2014: A Record Year So Far US$ in millions Nine months ended Sept % change YTD-14 vs. YTD-13 Operating income $2,493 $2, % Global P&C net premiums $10,638 $9,922* + 7.2%* Agriculture net premiums $1,346 $1,371 (1.8%) Total P&C net premiums $11,984 $11,292* + 6.1%* International Life premiums & deposits $1,340 $1,131* %* Combined ratio 87.5% 87.5% -- Invested assets $64,060 $61, % Operating return on equity 11.9% 12.3% (40 bps) Book value per common share $90.38 $ % Book value per common share, excl. AOCI $85.09 $ % * In Constant $ 1

4 In a World of Risk, Sustained Book Value Per Share Growth Natural Catastrophes Man-made Disasters Political Unrest Financial Crises ACE BVPS: $ Hurricanes Katrina, Rita and Wilma Financial Crisis/Great Recession 2010 Deepwater Horizon Oil Spill 2011 U.S. Tornados 2011 Japan Tsunami 2011 New Zealand Earthquake 2011 Arab Spring 2012 Hurricane Sandy 2012 U.S. Drought 2014 Thai Coup $90.2 ACE Operating BVPS ROE (CAGR) (Average) 3-yr 8.1% 11.3% 5-yr 12.9% 12.5% 10-yr 11.5% 13.7% Int l Peers* 3-yr 2.6% 7.7% 5-yr 4.1% 9.5% 10-yr 4.8% 12.3% U.S. Peers** 3-yr 5.4% 8.5% 5-yr 10.4% 9.1% 10-yr 4.8% 10.8% 2004 Hurricanes Ivan and Charley 2008 Hurricane Ike 2010 Chile Earthquake 2011 Thai Floods 2014 Ukraine/ Crimea Crisis 2004 (Q2) (Q2) International and U.S. peers BVPS CAGRs represent averages for each company; operating ROE averages are for calendar years * International Peers: Allianz, AXA, Munich Re, QBE, RSA, Zurich (Source: Thomson ONE) ** US Peers: Chubb, CNA, Hartford, Travelers, XL; BVPS includes impact of dilution for Hartford and XL (Source: SNL) 2

5 How ACE Creates Long-Term Value Clarity of Strategy Broad and balanced product, customer and distribution capabilities with substantial geographic presence Emphasis on specialty and traditional lines Pursuing faster-growing developing markets Expanding established positions in developed markets Patient, long-term builders of businesses Relentlessly focused on execution Capturing Growth Opportunities Global presence and capabilities provide deep optionality Growth organically and through strategic acquisitions Underwriting Excellence Disciplined culture Robust data analytics 3

6 Strategic Focus: Territory and Product Faster-Growing, Underserved Markets Faster-Growing Product Lines Data is the percentage of GWP* $24.1B $19.5B 25% 15% 19% 23% 56% 62% 36% 17% 47% Asia & LatAm Europe North America Data is the percentage of NWP 4% 3% 4% 4% $13.3B 24% 8% 53% 6% 3% 35% $17.7B 10% 21% 5% 9% 46% 5% 7% 40% 8% 6% 13% 24% 3% 7% 39% 51% Life Small Commercial Personal Lines A&H Reinsurance Agriculture Industrial Commercial and Specialty P&C Vision Vision Category 1 Category 2 Category 3 Category 1 Category data is for the year ended 9/30/2014 * Includes Life deposits 4

7 Region Spotlight: Asia Presence in 14 Countries GWP by Product Line Selected ACE Markets in Asia Consumer Life Consumer Non-Life $3.0B* 18% $ in millions Region Total GWP CAGR Year 10-Year $1,161 $1,636 $2,999* 13% 10% Commercial Lines 5% $1.6B 52% Korea $60 $126 $455 29% 22% Hong Kong $77 $85 $382 35% 17% $1.2B 54% Thailand $32 $142 $372* 21% 28% 44% 56% 41% 30% Malaysia $35 $58 $256 35% 22% Indonesia $19 $21 $130 44% 21% data is for the year ended 9/30/2014 * Pro forma for Samaggi Insurance 5

8 Korea: Innovative Multi-Distribution Drives A&H Growth World s 15 th largest economy 50 million people GDP 2013: $1.2T Long-term projected growth rate: 3.9% 2013 insurance penetration: 11.9% of GDP Non-life: 4.4% / Life: 7.5% ACE presence established 1968 (INA) GWP : $126M $455M (3.6x) 17 offices and 417 employees Growth in Country GWP ACE is Positioned for Growth US$ in billions Non Life Life $91.9B $42.9 $51.2 $52.3 $145.4B $54.2 Personal accident and supplemental health products sold through home shopping, outbound telemarketing (1,800 telemarketers) and bancassurance Personal lines (residential) and small commercial products using multi-distribution channels agency and direct Commercial P&C sold through traditional brokerage and agency $34.5 $57.4 $72.2 $79.2 $100.7 $91.2 Multi-distribution life sold through 1,000 captive agents, telemarketing and bancassurance Source: Swiss Re Sigma, except long-term (2019) GDP growth rate from International Monetary Fund s World Economic Outlook, October data is for the year ended 9/30/2014 6

9 Thailand: Presence, Product and SCB Partnership World s 29th largest economy 69 million people 2nd largest ASEAN economy (16.5%) GDP 2013: $387B Long-term projected growth rate: 4.3% 2013 insurance penetration: 5.5% of GDP Non-life: 1.7% / Life: 3.8% Growth in Country GWP ACE presence established 1947 (INA) GWP : $142M 34 offices and 447 employees ACE is Positioned for Growth $372M* (2.6x) Largest foreign-owned P&C insurer with rapidly growing life business US$ in billions Non Life Life $10.4B $4.2 $6.2 $5.3 $8.0 $6.0 $9.2 $5.7 $12.7 $21.5B $6.7 $14.8 Balanced mix of commercial, personal and life products Large commercial, middle market and small commercial Personal accident and supplemental health, auto and residential, and life Extensive distribution 34 standalone branch offices 1,000+ Siam Commercial Bank branches 600 outbound telemarketers marketing to SCB customers and retailer, credit card and financial institution customers 400 P&C brokers and 1,500 independent non-life agents 2,800 captive life agents Source: Swiss Re Sigma, except long-term (2019) GDP growth rate from International Monetary Fund s World Economic Outlook, October data is for the year ended 9/30/2014 * Pro forma for Samaggi Insurance 7

10 Region Spotlight: Latin America Presence in Nine Countries GWP by Product Line Selected ACE Markets in Latin America Consumer Life Consumer Non-Life Commercial Lines 16% $2.9B* 7% 40% $ in millions Region Total GWP CAGR Year 10-Year $514 $950 $2,909* 25% 19% Brazil $132 $319 $1,174* 30% 24% Mexico $170 $177 $864 37% 18% $1.0B 11% 53% Chile $26 $129 $255 14% 26% $0.5B 42% Colombia $25 $87 $173 15% 21% 40% 60% 47% Ecuador $28 $43 $142 27% 17% data is for the year ended 9/30/2014 *Pro forma to include October 2014 acquisition of the large commercial P&C business of Itaú Unibanco 8

11 Brazil: 1+1>2 with Addition of Itaú Corporate P&C Business World s 7 th largest economy 201 million people GDP 2013: $2.2T Long-term growth rate: 3% 2013 insurance penetration: 4.0% of GDP Non-life: 1.8% / Life: 2.2% ACE presence established 1958 (INA) GWP : $319M $1.2B* (3.7x) 20 offices and 750 employees #1 commercial P&C insurer in Brazil Growth in Country GWP ACE is Positioned for Growth US$ in billions Non Life Life $48.8B $24.0 $24.8 $31.0 $33.2 $37.2 $37.4 $41.0 $44.8 $88.9B $39.5 $49.4 Substantial commercial and personal product capabilities Leading P&C insurer for large and mid-sized companies Large, established personal accident/supplemental health business Growing presence in all major cities 20 branch offices and relationship with Itaú Unibanco Distribution Commercial: 3,000 brokers and independent non-life agents for large and mid-sized commercial business Consumer: 1,200 outbound telemarketers marketing to retailer, utility and financial institution customers Source: Swiss Re Sigma, except long-term (2019) GDP growth rate from International Monetary Fund s World Economic Outlook, October data is for the year ended 9/30/2014 *Pro forma to include October 2014 acquisition of the large commercial P&C business of Itaú Unibanco 9

12 Mexico: Product Breadth, Distribution Strength Drive Growth World s 14 th largest economy 123 million people GDP 2013: $1.3T Long-term projected growth rate: 3.8% 2013 insurance penetration: 2.2% of GDP Non-life: 1.2% / Life: 1.0% ACE presence established 1944 (INA) GWP : $177M $864M (4.9x) 64 offices and 2,125 employees Top five P&C insurer; #2 surety writer; #4 auto insurer Growth in Country GWP US$ in billions $27.4B Non Life Life $14.9 $17.4B $13.2 $12.1 $10.3 $9.7 $7.7 $8.9 $10.1 $10.9 $ ACE is Positioned for Growth Balanced mix of personal and commercial products Auto and residential, personal accident/supplemental health, and life Large commercial, middle market and small commercial Distribution strength: 4,900 agents and brokers, affinity sponsors and bancassurance ACE portfolio management/data analytics and distribution management being applied to ABA Seguros Actively exporting FM surety expertise across region and beyond (regional center of excellence) Unique customer service model supported by state-of-the-art technology and strong service culture Source: Swiss Re Sigma, except long-term (2019) GDP growth rate from International Monetary Fund s World Economic Outlook, October data is for the year ended 9/30/

13 North America: More Than Large Corporates and Growing 2014 GWP: $11.2 billion U.S., Bermuda, Canada / 73 Offices 6,900 employees 2014 Customer Split (Total P&C GWP)* Retail & Wholesale Commercial & Personal P&C NWP US$ in billions $6.2 50% 50% Large Corporate 50% 50% Middle Market, Small Commercial and Consumer (A&H, HNW and other) Private Risk HNW personal lines Westchester & Commercial Risk Wholesale and retail specialty middle market Bermuda Large corporate USA Industrial commercial and specialty large corporate and upper middle market $4.8 26% 9% 62% 3% $5.1 18% 6% 71% 5% 9% 18% 6% 67% Agriculture $0.4 $0.5 $ data is for the year ended 9/30/2014 USA on a GWP basis is 70% and includes large account fronted premium *Excludes crop insurance 11

14 North America: A Major E&S and Specialty Insurer E&S and Specialty Products Comprise 59% of P&C GWP Specialty Products for Middle-Market and Small Commercial Companies Traditional P&C Products 41% 59% E&S and Specialty P&C Products A&H E&S Railroad Agriculture P&C E&S Specialty/High Excess Casualty Aerospace Satellites Energy Aerospace Airports and Aircraft Environmental Construction Wrap-Up Foreign Casualty/ACE Advantage Contract/Commercial Surety Inland/Commercial Marine Cyber Kidnap & Ransom Defense Base Act Medical/Life Sciences E&S D&O and E&O Private Company D&O E&S Product Recall Professional Liability E&S Property Specialty Products for Large Corporate and National Account Customers 2014 P&C GWP (excluding crop and personal lines): $8.5 Billion A&H Commercial Surety Construction Wrap-Up Cyber Energy Environmental E&S High Excess Casualty Financial Institutions D&O and E&O Foreign Casualty/Cash Flow Foreign Casualty/CMP Inland/Commercial Marine Management Liability Medical/Life Sciences Political Risk Professional Liability 2014 data is for the year ended 9/30/

15 Region Spotlight: Europe GWP by Product Line Selected ACE Markets in Europe Consumer Lines Commercial Lines $4.2B $4.3B 7% $4.4B $ in millions Region Total GWP CAGR Year 10-Year $4,177 $4,346 $4, % 0.6% 14% 30% 32% U.K. Retail $1,395 $1,121 $1,154 1% (2%) Whsle $1,516 $1,154 $1,012 (3%) (4%) Germany $230 $309 $388 5% 5% 86% 70% 68% France $389 $504 $556 2% 4% Italy $185 $232 $241 1% 3% Spain $134 $247 $210 (3%) 5% data is for the year ended 9/30/

16 Track Record of Underwriting Excellence Combined Ratio vs. Peers 115% 110% 105% ACE North American Peers 1 Global Peers 2 100% 95% 90% Avg 96.6% 97.6% 91.7% 85% AIG, Chubb, CNA, Hartford, Travelers, XL 2 Allianz, AXA, Munich Re, QBE, RSA, Zurich 14

17 Profitability (Book Value Per Share CAGR) 06/30/ /30/2014 Achieving Profitability and Growth 06/30/04-6/30/ % 30% 10% AIG * Travelers Chubb ACE QBE Munich Re 5% AXA Zurich Allianz 5% 0% Hartford RSA XL Average (excluding ACE) (5%) (100%) (50%) 0% 50% 100% 150% 200% 250% Growth (Change in Market Capitalization) 06/30/ /30/2014 Size of bubble denotes market capitalization in USD at 06/30/2014 * AIG s book value per share unadjusted for stock splits; adjusted BVPS declined 18% (Source: SNL) 15

18 M&A vs. Buyback Returns /30/14 IRR 19% 9/30/14 BVPS Including Estimated Future Earnings 1 $106 $98 $6 $16 14% $92 $90 Shareholder cash spent on buybacks (illustrative) Shareholder cash spent on M&A (actual) Shareholder cash spent on buybacks (illustrative) Actual plus estimated future earnings (illustrative) IRR and BVPS analyses based on ACE closing share price on 11/25/14 1. Estimated BVPS including present value of estimated future cash flows. For Buybacks: 2015 forecasted incremental earnings from dividends saved capitalized at ACE s forward P/E multiple, plus present value of future dividend savings assuming dividend discount model. For Actual: 2015E income from deals capitalized at ACE s forward P/E multiple. Includes transactions from first full year of ownership. 16