Europe General Insurance. Investors Day Zurich, January 17, 2006

Transcription

1 Europe General Insurance Investors Day Zurich, January 17, 2006

2 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. Forward-looking statements include statements regarding our strategic direction, targeted profit improvement, return on equity targets, expense reductions, pricing conditions, dividend policy and underwriting claims improvements. 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 Zurich Financial Services plans and objectives 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 our core markets; (ii) performance of financial markets; (iii) levels of interest rates and currency exchange rates; (iv) frequency, severity and development of insured claims events; (v) mortality and morbidity experience; (vi) policy renewal and lapse rates; (vii) changes in laws and regulations and in the policies of regulators may have a direct bearing on Zurich Financial Services results of operations and on whether Zurich Financial Services will achieve its targets. Zurich Financial Services undertakes no obligation to publicly update or revise any of these forwardlooking statements, whether to reflect new information, future events or circumstances or otherwise. This communication is directed only at persons who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) or to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. It should be noted that past performance is not a guide to future performance. Persons requiring advice should consult an independent adviser. 2

3 Key messages We are the 2 nd largest player in our chosen European markets with considerable scale advantage We are implementing Pan-European strategies and platforms to consolidate our competitive advantage throughout the value chain Our strengths across all distribution channels and our skills in customer segmentation generate profitable growth Management discipline and the Zurich Way initiatives underpin high profitability and stable earnings growth We have made substantial operating improvements to date and have a full pipeline of further initiatives 3

4 Topics and speakers Zurich s Pan-European approach leveraging our competitive advantage Dieter Wemmer Our way to pan-european platforms Theo Bouts Transforming multi-channel distribution in Spain Julian Lopez Exceeding market growth in Italy Francesco La Gioia Segmenting markets leveraging insight for profitable growth in the UK Playing in our mature markets a snapshot of Germany and Switzerland Ian Stuart Dieter Wemmer 4

5 Zurich s Pan-European approach leveraging our competitive advantage Dieter Wemmer CEO Europe General Insurance

6 Agenda Zurich s Europe General Insurance segment Europe General Insurance performance Building on Europe s core strengths for profitable growth 6

7 Zurich Financial Services in Europe Global Life Insurance in Europe Europe General Insurance (EGI) Global Corporate in Europe 2004 GWP 1 : USD 17 billion 2004 GWP: USD 12 billion 2004 GWP: USD 4 billion 4 th largest European General Insurer 2 nd largest General Insurer in our chosen European markets Focus of today s presentation 1 Including policy fees and insurance deposits 7

8 Our focus is on 8 chosen markets Market share 1 Market ranking 1 PL/CL split 2 UK 7.6% # 4 40/60 Germany 3.9% # 7 60/40 Switzerland 17.5% # 1 60/40 Italy 3.8% # 8 80/20 Spain 5.2% # 5 100/0 Austria 4.2% # 6 60/40 Ireland 9.4% # 5 50/50 Portugal 7.9% # 5 50/50 1 As of year end 2004, based on GWP, including corporate lines, excluding health insurance; UK numbers based on gross earned premiums 2 Split of personal and commercial lines in % 8

9 Zurich has access to 66% of Europe s General Insurance market Distribution of General Insurance premium volume E CH A IRE P I North America 46% Europe 36% Zurich markets Other European markets RoW 5% Asia 13% UK GWP World: USD 1,395 billion 1 Source: sigma No2/2005: world insurance in 2004 D GWP Europe: USD 504 billion 9

10 A well diversified business mix GWP by country in USD GWP by line of business in USD Italy 1.5bn Rest of Europe 1.3bn Spain 1.1bn 9% 12% 11% 34% UK 4.2bn Accident 0.6bn Liability 1.7bn 14% Other 1.1bn 5% 9% 47% Motor 5.8bn Switzerland 1.8bn 14% 20% Germany 2.4bn Property 3.1bn 25% Total 2004 gross written premiums: USD 12.3 billion 10

11 Structure of Europe General Insurance a fully integrated organization EGI Executive Team Dieter Wemmer CEO Claudia Dill CFO Theo Bouts COO Lutz Bauer CCO Tim Carter CUO I. Stuart CEO UK E. Thometzek CEO Germany M. Hongler CEO Switzerland F. La Gioia CEO Italy J. Lopez CEO Spain Functional setup Matrix organization for finance, operations, claims management and underwriting as well as for the support functions marketing, communications, human resources, risk management and legal R. Rheel CEO Ireland R. Kraft CEO Austria J. Coelho CEO Portugal 11

12 Agenda Zurich s Europe General Insurance segment Europe General Insurance performance Leveraging Europe s core strengths 12

13 Strong and improving overall performance in all customer segments in USD billions for the nine months ended Sep 30 Personal Lines Commercial Lines Total Gross written premiums Net earned premiums Business operating profit Loss ratio 69.9% 70.3% 74.0% 77.0% 71.5% 73.0% Expense ratio 23.4% 24.9% 21.8% 21.9% 22.9% 23.7% Combined ratio 93.3% 95.2% 95.8% 98.9% 94.4% 96.7% BOP/NEP 11.2% 10.0% 12.8% 9.1% 11.9% 9.7% 13

14 Our focus is on profitable growth in USD millions for the nine months ended Sep 30, 2005 Italy Spain GWP 1, GWP Growth 1 10% 9% GWP growth: 5% - 10% 0% - 5% -5% - 0% -10% - -5% Switzerland 2 1,581 3% Germany 2,091 0% Rest of Europe 1,040-1% UK 3,052-6% Total 9,769-1% 1 Versus prior year in local currency 2 GWP Growth adjusted for portfolio transfers of USD 68 m in

15 and results in strong profitability for the nine months ended Sep 30, 2005 UK Germany BOP BOP Growth 2 48% -14% BOP/NEP 12.6% 10.2% CoR 96.7% 93.9% Combined ratio: 91% - 93% 93% - 94% 94% - 95% 95% - 97% Switzerland % 11.5% 94.2% Italy % 10.6% 94.2% Spain 94 42% 13.0% 91.7% Rest of Europe % 12.9% 91.9% Total 1,060 28% 11.9% 94.4% 1 In USD millions 2 Versus prior year, as reported 15

16 Agenda Zurich s Europe General Insurance segment Europe General Insurance performance Leveraging Europe s core strengths 16

17 What we have achieved so far Refocused on 8 historically highly profitable, structurally attractive markets Significantly improved combined ratio with expense ratio further reduced Integrated European matrix organization established, allowing us to fully optimize the value chain and improve market response time Progress in increasing scale, driven by an integrated European platform and the European shared services program The Zurich Way initiatives have supported a step-change, strengthening operational excellence in underwriting, claims, and distribution 17

18 Vision and key focus areas for EGI 2010 vision Key focus areas Leading European insurer with toptier positions in chosen markets Sophisticated way of doing business Cost leadership Distribution transformation Market / customer environment Operational performance Financial performance Distribution / organic growth Talent management M&A strategic opportunities 18

19 Responding to the challenges of our environment Environment and trends Relatively benign rate environment, but increased pressure on rates in commercial lines fleet and personal lines motor Our response Focus on profit rather than growth Sophisticated segmentation, underwriting, risk selection, technical & behavioral pricing The Zurich Way u/w and claims initiatives Increasing competition for market share; direct distribution, partnerships and the Internet are growing faster Segmentation strategy Growing distribution network and points of sale Roll-out of brand campaign Strong market focus on costs Expense ratio significantly reduced Continuing cost discipline Multi-national insurers focus on group wide operational excellence programs Zurich has run operational excellence programs with a 3 year track record Further initiatives on the way 19

20 Transforming multi-channel distribution to maximize access and customer insight Tied agents growing network by 1,200 agents enhancing point of sales effectiveness driving productivity improved customer insight higher competencies at point of sale, development of relevant products Brokers leveraging large brokers across Europe optimizing IT-connectivity more efficient and effective channel management increased sales productivity generates customer satisfaction and loyalty Direct strengthening Pan-European capabilities expand strong position in direct distribution extend product portfolio enhanced profitability Partnerships growing partnerships across banks, corporate customers and car dealers optimizing IT-support and product range 20

21 across all channels and markets New business Gross Written Premiums 1 Broker Agent Partnership Direct PL Other UK D CH I E Other Total % 40% 20% 1,636 (+3.5% 2 ) 1 In USD millions, for the nine months ended Sep 30, Versus prior year, in local currency 21

22 Our way to Pan-European platforms Theo Bouts COO Europe General Insurance

23 Agenda Zurich s Pan-European platform and The Zurich Way enhancing value creation EGI s cost advantage: much achieved and more to come Benefits of EGI s multi access opportunities 23

24 Zurich s profit improvement initiatives a shift to underwriting and distribution in Europe EGI contributed significantly to all profit improvement initiatives Well spread initiatives across all countries reflecting their scale The 2004 and 2005 main focus on claims will shift to underwriting and distribution/sales for the 2006 and 2007 initiatives 12% 7% 35% 46% 15% 35% 16% 19% 15% 59% 7% 8% 26% Sales/Dist. Claims U/W Pricing Expenses The focus in more granularity: Underwriting Cat accumulation management Technical price, target price Fast-flow products for SMEs More sophisticated segmentation Distribution / Sales Delivering tied agents Sales excellence in General Insurance Independent distribution 24

25 The Pan-European platform: optimizing the value chain for competitive advantage UK Customer Marketing, Distribution U/W, Pricing Claims Finance Operations, IT Supplier CH Customer Marketing, Distribution U/W, Pricing Claims Finance Operations, IT Supplier Customer Marketing, Distribution U/W, Pricing Claims Finance Operations, IT Supplier EGI Customer Marketing, Distribution U/W, Pricing Claims Finance Supplier Operations, IT Our 8 countries enable us to : Shorten, compress and optimize the value chain with cost optimization in every single value chain element Align the European management structure along the value chain Deliver results and leverage synergies through 1 European value chain Long term goal : operate on 1 single European platform 25

26 The Zurich Way (TZW) and the Pan-European platform: why they drive profitable growth Enhanced management control with less friction Shortened innovation time allows faster responses to customer needs TZW initiatives spread out equally within a tightly controlled framework 8:1 8 country implementations empowered and accelerated by 1 idea 8:1 8 European countries, 1 European mindset EGI Profitable growth Pan European Platform TZW 26

27 The Zurich Way & the Pan-European platform: what we have already achieved Claims Management 1 Underwriting 2 Excellence in motor claims personal injury case management, fraud defense and loss adjustment control are key success areas key learning transferred and incorporated into key performance indicators Property & Liability Opportunities identified and 70 initiatives set up Major focus on underwriting leakage Quality of risk selection and pricing improved Pan-European scorecards implemented ready for implementation in More details provided in our investors day presentation of June 30, More details provided in our investors day presentation of January 20,

28 On track for major operating improvement in 2006 and onwards Leveraging distribution power by increasing sales force and productivity with The Zurich Way initiatives for Tied Agents and Sales Excellence Tied Agents (3 waves) Sourcing Managing Succession Sales excellence Focus on individual agent: improve productivity, quality, know-how Availability of agent toolbox Double current market growth in 3 years Increase policy density per agent 28

29 Further cost and quality advantages through European Shared Services (ESS) Marketing Human Resources Facility Management Marketing Legal Risk Communication Procurement Communication Human Resources ESS Legal Risk Facility Management Procurement First Wave 1 European manager in charge of the 7 support services in each country, servicing all three business divisions in Europe More efficiency, enhanced quality and reduced costs with a FTE reduction of 260 (21%) since 2004 Second Wave 1 small European department in charge of the 7 support services in all 8 countries Realignment, optimization and full leverage of processes (e.g. centers of excellence for procurement, new Zurich workplace, shared risk management small countries, 1 European e-hr system) 29

30 Agenda Zurich s Pan-European platform and The Zurich Way enhancing value creation EGI s cost advantage: much achieved and more to come Benefits of EGI s multi access opportunities 30

31 Cost advantages in EGI from globalizing IT Initiatives Results of the last 3 years Cost Reduction through common European IT- platforms Economies of scale by centralizing local data center activities into one regional data center Increase of flexibility and offshoring of capabilities through outsourcing application support and development to CSC Contract with Equant as the Pan- European provider for telephone and data network services Decrease of unit costs Infrastructure costs down 28% Desktop costs down 19% Development costs down 21% New applications costs down 23% Voice/data costs down 20% Pan-European buying power significantly increased Mainly reinvested in front office systems and further efficiency improvements 31

32 Cost advantages of shared marketing and Zurich s global branding campaign ESS marketing Joint market and customer satisfaction research Streamlining local marketing teams, strategy and blueprint Brand and marketing as a main lever for profitable growth in personal lines and SMEs Global branding campaign For several countries one advertisement standard TV spots in all countries one single European media buying operation Consistent company image across Europe Lower costs 32

33 More cost advantages Procurement Consultant panel established Legal expenses: Zurich Group, European and local panels established with terms and conditions in place Office printers: 1 supplier for purchasing, storage and distribution for all print products, costs reduced by 25-30% Traveling: on-line tool installed, average ticket price reduced by 10-15% Promotional items : 1 supplier for Europe, standardized new products Real estate & facilities management Space efficiency: 5-10% improvement of property costs Contract bundling: 3-10% cost reduction due to scale benefits 33

34 Significant expense ratio improvement 26% 24% 22% Personal Total Commercial 20% Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q

35 Pan-European reinsurance purchasing a centralized model with decentralized experts Virtual European reinsurance teams, management by line of business Country reinsurance experts with business division responsibilities Enhanced sharing of key knowledge and process leverage Positive impact on external reinsurance pricing and reputation Alignment with EGI technical center and Group reinsurance structures Increased retention levels in all lines of business EGI retention levels % 95.7% 96.3% Increase of premiums retained by USD 0.6 billion lower reinsurance costs less dependency on rates environment 1 Pro-forma number 2 For nine months ended Sept

36 Agenda Zurich s Pan-European platform and The Zurich Way enhancing value creation EGI s cost advantage: much achieved and more to come Benefits of EGI s multi access opportunities 36

37 Multi access to customers creates more points of sale Agents: a transformed franchise Brokers: leveraging successful models + 1,200 (12%) 10,000 Today 2008 target Direct: Number 2 in Europe 2003 GWP (in USD millions) Top 5 European Players 2, Partnerships: the making of jewels Professional associations GC in Europe: Large employers Interest Government Organizations Unions Health Sector EGI Worksite Employees Utilities Motor Brands Financial Brokers Services Big Retailers EGI Affinity Members EGI Wholesale Customers 37

38 The new Pan-European platform: accelerating profitable growth in non-mature channels Broker Agent Partnership Direct PL Other New platform UK Room for further growth D CH Facilitates Direct and face-to-face distribution I Special focus on small business E fast flow Focus on agents Other and brokers remains 38

39 by ONE value proposition for Direct and Partnerships Local value chain Marketing, Distribution U/W, Pricing Claims Finance Operations, IT Pan-European value chain with ONE value proposition Marketing, Distribution U/W, Pricing Claims Finance Operations, IT Local within European framework Pan-European ONE value proposition Three focus areas - Personal lines - SMEs, fast-flow - Partnerships Strong focus on retention elements and customer lifetime value Loyalty ONE operational platform One Pan-European back office One IT system for front & back office Customer self-service on the web, supported by phone help Automated underwriting & claims management Significant process improvements and very low admin costs 39

40 Smaller units also benefit from operational excellence GWP and BOP in USD millions for the nine months ended Sep GWP BOP Holding the line with pricing Expansion of Direct channel Streamline broker relationship management Low combined ratio of 93.1% Strong and stable market One of the market leading expense ratios, down 6 pts to 26.1% Segmented approach Doubled # prime agents Expense ratio 3 pts below market average at 22.6% Ireland, Austria and Portugal contribute about 10% of both gross written premiums and business operating profit within Europe General Insurance 40

41 Summary Strong and sustainable performance Effective structure in place with a high performing team Well diversified by geography, business mix and distribution Well positioned for strategic opportunities and our new platform allows us to maximize benefits EGI s operational excellence is established and on track to deliver continued profitable growth 41

42 Transforming multi-channel distribution in Spain Julián López CEO Spain (as of 1 April 2006)

43 Agenda The Spanish General Insurance market Performance highlights The Zurich Way for Tied agents Spain s multi-channel approach for profitable growth 43

44 The Spanish General Insurance market Market split by Line of Business 1 Top 10 insurers market share 1 Other 13% Accident 3% Liability 7% Property 26% Motor 51% 1. Mapfre 19.1% 2. Allianz 7.8% 3. Axa 6.4% 4. Generali 5.3% 5. Zurich 5.2% 6. Winterthur 4.3% 7. Catalania 4.3% 8. Mutua Madrileña 4.0% 9. Caser 3.5% 10. Santa Lucia 3.2% Total General Insurance market: USD 27.6bn 1 Total Top % 1 Source: ICEA, based on 2004 local statutory figures, including Corporate business, excluding health 44

45 The Spanish personal lines market: a market with growth potential General Insurance market growth 1 (in%) Motor Home Shops General Insurance growth potential 2 GWP per capita 2004 in USD Source: ICEA 2 Source: Swiss RE Sigma report 1,064 Spain EU 15 Zurich s 2004 ranking and market share 1 Motor # 5 5.6% Home #13 3.6% Shops # 6 7.2% 45

46 Agents dominated the market distribution in Business in force 16% 11% 2% 28% USD 13,983m USD 3,214m USD 635m 5% 7% 5% 24% 43% 51% 33% 57% 18% Motor New Business 8% Home Shops USD 2,922m USD 422m USD 115m 5% 4% 6% 15% 3% 41% 28% 50% 58% 32% 33% 17% 1 Source: ICEA Tied agents Ind. agents Banks Direct Others 46

47 Agenda The Spanish General Insurance market Performance highlights The Zurich Way for Tied agents Spain s multi-channel approach for profitable growth 47

48 Zurich Spain shows continuous improvement in all key performance indicators in USD millions for the year ended December 31 Gross written premiums and policy fees Business operating profit Loss ratio Expense ratio Combined ratio 9 months , , % 73.4% 69.1% 69.5% 26.5% 24.3% 23.4% 22.2% 105.1% 97.7% 92.5% 91.7% GWP growth rates (in %) Motor Home Shops E E E 1 Pro forma numbers 2 As reported in new customer segments format Market Zurich 48

49 and now outperforms the market Underwriting performance 1 in 1998 and 2004 Zurich 1998 Market 1998 Zurich 2004 Market 2004 Loss ratio 79.7% 79.3% 69.2% 70.5% Expense ratio 30.7% 27.5% 22.2% 21.5% Combined ratio 110.4% 106.8% 91.4% 92.0% Ratio improvements vs.1998 (in percentage points) Loss ratio Expense ratio Zurich Market Zurich Market Combined ratio Zurich Market 1 Based on local statutory numbers 49

50 Agenda The Spanish General Insurance market Performance highlights The Zurich Way for Tied agents Spain s multi-channel approach for profitable growth 50

51 The Zurich Way for tied agents: managing the agency lifecycle for profitable growth Sourcing & recruiting Management Succession planning Formalized sourcing process Single value proposition Formalized continuation plans for retiring agents Agency interface Develop productivity Agency compensation Manage profitability Territories and field management Connectivity and access Segmentation Target setting Sales funnel Improve retention Monetary and nonmonetary systems Alignment with evolving objectives Review portfolio profitability Develop risk selection skills Initiatives planned and implemented in 2005 and

52 and how it drives efficiency within the Pan-European platform Implementation of a common approach across Europe Sharing expertise, ideas, best practices and key learning Common monitoring, language, methodology, tools and metrics Common European activities in sourcing, managing and succession with local adaptation European scorecard to measure performance in a comparable way We are developing an entrepreneurship, offering a common value proposition across Europe (channel/ market adjusted) More than 1,200 agents to be recruited over the next 3 years 52

53 Agenda The Spanish General Insurance market Performance highlights The Zurich Way for Tied agents Spain s multi-channel approach for profitable growth 53

54 Above market growth through effective, profitable distribution channels High quality in pre and post sale with intermediaries easy multi-access Personalized offers based on customer knowledge Technological connectivity as a differentiating factor: with client, intermediary and partner Products standardization with personalized marketing Focus on personal lines and small business Easy to do business with Intermediaries Partnerships 54

55 Implementing The Zurich Way for Tied Agents in Spain The transformation model Strategy Segmentation of the different levels of the value proposition People IT connectivity, service, training and productivity tools Sales and marketing development tools Systems Sales Activity Planning Process system Processes 55

56 Implementing the model: more sophisticated sourcing Sourcing & recruiting Management Succession planning Specialized sourcing teams with geographical positioning tools New agent, new criteria/characteristics for approval Sales speech, marketing material Performance monitoring & control system Example: 2005 recruiting process Prospects in database Contact Prospect Applicant New agents 19% Total number 4,000 1, Hit rate 34% 53% 43% 80% 56

57 with smarter managing and succession planning Sourcing & recruiting Management Succession planning Managing Adjust value proposition / segmentation: motivate agents to increase the relationship with Zurich to reach higher segments Customer retention: - proactive: churn decrease of valuable clients - reactive: decrease of unpaid receipts Focus on small agencies: - improve average portfolio/ profitability - decrease total number of small agencies Sales excellence Succession Track agency demographics Formalised process for reacting to agents retiring Maximize policy book value through succession Business continuity plan 57

58 resulted in significant achievements so far Higher productivity with less intermediaries 6,800 8,000 6,000 CAGR 17% 4, E Intermediaries New policies Improved access and IT connectivity The number of intermediaries decreased from 6,800 in 2001 to 4,101 as at year end 2005 (-40%) At the same time, new policies issued increased by 88% from 201,000 to 377,000 More than 30% of our intermediaries now have full access to our front and back office systems (2001: 2%) 4,000 2, E Intermediaries Intermediaries with full access Back office work significantly shifted to agents as IT connectivity increased from 15% in 2001 to 72% in

59 Profitable growth through partnership distribution Pioneers with partnership distribution Partner selection with mutual brand reinforcement Full IT connectivity and integration into partnership systems Customer Zurich sale Zurich call center Partner sale Partnership front office Zurich call center Post sale Zurich IT system Zurich office 59

60 with main focus on bank partners going forward Standardized products with tailored services Simple purchase processes with full front end integration Direct IT connection, back office and post sale service 3 years distribution agreement, remuneration based on volume and profitability Target segmenting by lines of business (Motor, Home, Shops) Bank partners Win-win situation and competitive advantage for both bank partners and Zurich Zurich Additional income stream at low capital costs Enhanced product range Customer loyalty Competitive advantage Vast distribution capacity High growth potential Competitive advantage Stable stream, less price sensitive channel 60

61 Next steps to further enhance the benefits of our multi-distribution approach Accelerate our non-motor growth while maintaining our strength in motor Expand alternative channels with our partnership strategy Improve customer insight Increase focus on market and environment 61

62 Key take aways Spain Spain is a growth market Zurich Spain has successfully implemented a profitable multi-channel strategy The results of the intermediaries transformation and TZW Tied agents are positive and sustainable We have been pioneers with partnerships and we target to grow this business model to further gain market share 62

63 Exceeding market growth in Italy Francesco La Gioia CEO Italy

64 Agenda The Italian General Insurance market Zurich Italy s successful track record a profitable growth story Key growth drivers and competitive advantage Market segmentation Agents Direct Business Claims management 64

65 The Italian General Insurance market Market split by Line of Business 1 Top 10 insurers market share 1 Property 13% Accident 9% TPL 9% Other 7% Motor other 9% Motor TPL 53% Total General Insurance market: USD 42.1bn 1. Fonsai 20.0% 2. Generali 15.9% 3. Allianz 15.7% 4. Unipol 11.3% 5. Toro 6.4% 6. Reale Mutua 5.0% 7. Cattolica 4.0% 8. Zurich 3.8% 9. Axa 3.4% 10.Sara 2.3% Total Top % 1 Source: ANIA, including corporate lines, excluding health insurance 65

66 Besides agents and brokers, Zurich Italy has a strong direct channel Total market distribution channels 1,2 Zurich Italy s distribution channels 2 Direct 2% Brokers 8% Banks 1% Other 4% Brokers 10% Direct 9% Other 1% Agents 85% Agents 80% 1 Source: ANIA Insurance Companies Association 2 As of year end

67 Agenda The Italian General Insurance market Zurich Italy s successful track record a profitable growth story Key growth drivers and competitive advantage Market segmentation Agents Direct Business Claims management 67

68 Zurich has consistently exceeded market growth while improving profitability Annual GWP growth 1 (in %) E Zurich Market Zurich s market share: 2.5% Zurich s market share: 2.8% Zurich s market share: 3.8% 1 Based on local statutory numbers 68

69 Despite limited scale, Zurich Italy s performance improvement is remarkable Underwriting performance 1 in 1998 and 2004 Zurich 1998 Market 1998 Zurich 2004 Market 2004 Loss ratio 88.9% 87.1% 66.8% 70.5% Expense ratio 29.3% 24.2% 22.7% 22.8% Combined ratio 118.2% 111.3% 89.5% 93.3% Ratio improvements vs.1998 (in percentage points) Loss ratio Expense ratio Zurich Market -30 Zurich Market Combined ratio Zurich Market 1 Based on local statutory numbers 69

70 Agenda The Italian General Insurance market Zurich Italy s successful track record a profitable growth story Key growth drivers and competitive advantage through Market segmentation Agents Direct Business Underwriting and claims management 70

71 Leading innovation in Italy by using specific customer segmentation tools Focus groups Tied Agents Market dimension, trends and potential Market analysis Brokers Competitors Employees Costumer needs Prospects Customers Distribution Legal Policy risk and profitability Target management resources Reinsurance Data analysis / organization 71

72 and providing a wide offer to our main target groups Non-motor business mix by core segments 1 Senior citizens 17% Hotels, small companies and shops 16% Families 25% SMEs (utilities, public sector, manufacturing) 16% Not yet segmented 26% 1 As of

73 We have a sophisticated agent approach The issue Agents are not an homogeneous group... and our response Segmentation of agents sales force providing different levels of training, underwriting authority, discount policy and supervisory support Adequate and competitive commissions Commission incentives are based on volume growth and profitability Fluctuation Well recognized brand within the industry that helps to retain trained agents and attract new skilled agents 73

74 A significant productivity improvement 488 agencies, with significant increase of average portfolio: USD 1.7 million in 2001 to USD 3.4 million in 2004 High product density of 2.78, up 5% versus 2001 Average number of customers per agency Average number of policies per agency 4,000 2,000 2,100 2,630 4,000 2,000 3,470 4, new business by agents 1 up 14% in General Insurance and 9% in Life 1 Versus prior year 74

75 Direct Business we are the fastest growing player in the last three years Zurich entered the market with Zuritel in 2000, shortly after the start of Direct business in the late 90s Only 7 players compete in the Italian Direct market with Zurich as one of the pioneers Customers are more familiar with remote transactions The future of Direct business is the Web Key competitive drivers are scoring / pricing / underwriting marketing and advertising Direct Business growth 1 (in %) 60% 40% Zurich 20% 0% Market Direct Business volume (in USD millions) Market ,080 Zuritel Share 7.6% 7.8% 9.1% 12.1% 1 Source: ANIA 75

76 Claims management Italy s focus is fully consistent with The Zurich Way Efficient claims handling benefits both the customer and the company simple claims need speedy handling (centralised claims unit) complex claims need attention to detail and local touch (40 field offices) Effective use and control of external suppliers Continuous claims file reviews produce ongoing process improvements A stronger discipline in measuring performance Specific training (technical and behavioural) Common methodologies 76

77 resulting in measurable improvements and high customer satisfaction Savings of fraud detection and recoveries (in USD millions) Claims leakage (in % of GWP) % E USD 4.7m E Fraud Recovery Excellent claims management at no expense of customer satisfaction Zurich Italy has won three market awards for customer satisfaction in a row 1 Improvement in local currency 77

78 Key take aways Italy The Italian market will remain attractive and continues to offer profitable growth opportunities Zurich Italy has a strong track record Agents are one of our main assets, within our multi-channel framework The efficiency in claims management is vital to maintain our promise to the customers 78

79 Segmenting markets leveraging insight for profitable growth in the UK Ian Stuart CEO UK General Insurance

80 Agenda Our position in the UK General Insurance Market Zurich UK Performance Enhancing our Personal Lines market position Key levers of success Market strength in commercial and municipal lines TZW Underwriting Streamlining our operating model to low cost Unique customer insight 80

81 Zurich is a significant player in the UK General Insurance Market Top 5 General Insurers 1 Market Company share 1 Aviva 14.0% 2 RBS Insurance 13.7% 3 Royal and Sun Alliance 8.9% 4 Zurich 7.6% 5 Allianz 4.6% Top 5 by market segments 1 Market Personal Lines share 1 RBS 23.6% 2 Aviva 13.9% 3 RSA 7.1% 4 Zurich 5.0% 5 CIS 3.3% Market Commercial Lines share 1 Aviva 13.7% 2 RSA 10.3% 3 Zurich 9.7% 4 Allianz 6.8% 5 New Hampshire 5.5% 1 Source: Datamonitor 2004 figures based on gross earned premium, including Global Corporate, excluding health and accident 81

82 Our business mix is aligned with our strategic intent Commercial lines GWP Split 1 Other 25% Public Liability 19% Market Employers Liability 11% Property 28% Motor 17% Other 6% Public Liability 12% Employers Liability 18% Motor 22% Zurich Property 42% Personal lines GWP Split 1 Property 42% Property 43% Motor 58% Market Motor 57% Zurich 1 As of September 30,

83 Agenda Our position in the UK General Insurance Market Zurich UK Performance Enhancing our Personal Lines market position Key levers of success Market strength in commercial and municipal lines TZW Underwriting Streamlining our operating model to low cost Unique customer insight 83

84 Performance - that is now market leading. Combined ratios of Zurich and key competitors (local statutory) 140% 130% 120% 110% 100% 90% 80% Axa RBS Allianz RSA Aviva Zurich 1 Source: E&Y research for ZFS using published data (e.g. FSA returns) 84

85 Excellent results for the first nine months 2005 in USD millions for the nine months ended Sep Change Gross written premiums and policy fees 3,052 3,208-6% 1 Net underwriting result % Business operating profit % Loss ratio 72.2% 75.5% 3.3pts Expense ratio 24.5% 23.9% -0.6pts Combined ratio 96.7% 99.4% 2.7pts in USD millions for the nine months ended Sep Change Personal lines premiums 1,228 1,202 1% 1 Commercial lines premiums 1,824 2,006-10% 1 of which Municipal % 1 1 In local currency 85

86 Agenda Our position in the UK General Insurance Market Zurich UK Performance Enhancing our Personal Lines market position Key levers of success Market strength in commercial and municipal lines TZW Underwriting Streamlining our operating model to low cost Unique customer insight 86

87 Zurich s commitment to UK personal lines Facts, A profitable portfolio with 2004 GWP of USD 1.6 billion or 40% of our total UK book 2 million customers who rely on us Strong relations with 3,000 independent brokers performance 1, PL Motor, combined ratio 2004 PL Property, combined ratio % 102.5% 102.0% 102.0% 97.0% 96.0% actions Improve IT front-end connectivity High profile participation in Pan-European initiatives Improve international brand support and enhance marketing capability 1 Source: company data Zurich Aviva RSA Zurich Aviva RSA 87

88 We are proactively responding to the challenges of our environment Intensifying market competition Our response Increased marketing spend Finer margins in Partnerships Ongoing Broker Consolidation Remain committed to all three channels - Leverage leading broker position - Exploit proven Partnership capabilities - Grow Direct in profitable segments Move to customer centric approach Enhanced insight and analytical capabilities Wider product range / cross-selling Exploit Zurich Pan-European opportunities 88

89 and pursue effectiveness along the value chain Marketing and Brand Professional Expertise, u/w Sales, service, credit control Support functions Claims management Objectives Differentiate customer proposition Use intellectual capital, keep u/w discipline Drive down costs Improve efficiency Actions Increase targeting sophistication Leverage brand investment Exploit other retail brands Apply TZW initiatives Deploy rating tools Offshore credit control and administration Process simplification Outsource administration Leverage shared services Invest in new systems One UK claims approach Outsource non core activities 89

90 Agenda Our position in the UK General Insurance Market Zurich UK Performance Enhancing our Personal Lines market position Key levers of success Market strength in commercial and municipal lines TZW Underwriting Streamlining our operating model to low cost Unique customer insight 90

91 Commercial and municipal lines: jewels of our market strength Commercial Lines (35% of our book) Commercial Lines Insurer of the Year 2005 Transforming from a generalist insurer to a multi-niche specialist The experts who can t be ignored Industry recognition for discipline in sales and underwriting, delivering superior financial performance Municipal (25% of our book) Ranked 1st or 2nd in all our target markets Establishing competitive advantage through application of insight strategy Track record in delivery of sustainable profitable growth Unique cost advantage through direct distribution, world-class expense ratio GWP (in USD millions) Municipal Combined ratio (in%) 1,600 1, Commercial Municipal 110% 100% 90% Total Commercial and Municipal 0 80%

92 Delivering on TZW Underwriting Pre 2001: 2001: : 2005 onwards: what did we find? First steps harvesting first fruits more to come Gaps in best practice Gaps in rating tools Inadequate specialist knowledge Lack of consistent profitability analysis CUE 1 U/w leakage (5%- 10%) identified New rating tools developed New, consistent processes New rating tools launched Measured benefits of TZW and CUE 1 Refined file reviews Benefit: USD 94m Global rollout TZW solutions Additional strategic rating tools Underwriting leakage development 2 in % of Gross Earned Premiums Commercial Employers Liability Commercial Property CUE: Creating Underwriting Excellence 2 Numbers include Global Corporate 92

93 Streamlining our operating model to low cost Operating model Merger of Zurich Commercial and Municipal business units Personal lines One claims management now organisation for fully integrated all UK business Shared Services platform and legal entity simplification Positioned for growth in chosen markets 93

94 Customer insight in commercial lines why are we better in a USD 2.5 billion book? 2004 GWP commercial lines Non segmented, USD 625m Local authorities, USD 525m 25% 21% Other segmented, USD 550m 22% 8% 16% 8% Construction, USD 200m Property investors, USD 200m Major customers, USD 400m Local authorities Construction Property investors Major customers Individual customer insight and unrivalled knowledge of sector Key relationships with selected brokers - expert UW knowledge Attractive customer proposition Strong customer relationships - tailored service propositions 94

95 The performance improvements due to customer insight are impressive and Significant scale, expertise and flexibility in each market segment Absolute focus on segments enables effective management of the market cycle Customer insight targets resource and capital to benefit shareholder and customer Generating value from broker channel management Example: KPIs of Construction and Property Investors (PI) segment GWP (in USD millions) Combined ratio improvements since PI Construction Property Investors Construction pts pts 0-12 pts -15 pts

96 and also recognized and applauded by the market Zurich UK Commercial insurer of the year The insurer of choice through technical expertise - Recognised by broker community as providing consistently high quality service and support - Provision of educational communications such as Managing the cost of claims booklet - Broker and customer relationship management capabilities - Well recognised levels of insight in specialist target markets - Quality of claims service 96

97 Key take aways UK Achieved market leading combined ratio in 2004 Excellent results for the first nine months 2005 Strong commitment to UK Personal Lines Commercial & Municipal lines remain jewels to our market strength Excellence in underwriting drives profitability Success built on customer insight, segmentation and cost control 97

98 Playing in mature markets a snapshot of Germany and Switzerland Dieter Wemmer CEO Europe General Insurance

99 Germany at a glance GWP per line of business New business by distribution channel Accident 6% Liability 15% Other 14% Affinity 7% Direct 21% Other 5% Broker 32% Property 17% Motor 48% Agents 35% in USD millions for the nine months ended Sep Change Gross written premiums and policy fees 2,091 2,023 3% Business operating profit % Loss ratio 70.7% 71.6% 0.9pts Expense ratio 23.2% 23.1% -0.1pts Combined ratio 93.9% 94.7% 0.8pts 99

100 Switzerland at a glance GWP per line of business Other 14% Accident 12% Liability 8% Property 13% Motor 53% New business by distribution channel Other 2% Direct 9% Broker 14% Agents 75% in USD millions for the nine months ended Sep Change Gross written premiums and policy fees 1,581 1,557 2% Business operating profit % Loss ratio 74.9% 72.9% -2.0pts Expense ratio 19.3% 26.6% 7.3pts Combined ratio 94.2% 99.5% 5.3pts 100

101 Driving our multi-channel approach in Germany and Switzerland Tied agents Brokers - grow agent network by more than 10% - rework and grow Bonnfinanz more than 10% - increase of sales productivity - grow agent network by 14% - increase of sales by productivity - increase points of sale and one-stop processing of sales - increase efficiency and effectiveness of broker channel management Direct Partnership - further build on market leadership (37% market share in direct motor) with a strong u/w results - link local direct platform into the new Pan-European platform - leverage Corp. customer market position - further leverage our market leading partnerships with Deutsche Bank and ADAC (product range) - implement car dealer partnerships with VW, Audi, Porsche and SEAT (approx. 20% of new car market) 101

102 Cost discipline secures bottom line and will be maintained Expense ratio development (in%) Germany Switzerland For the nine months ended September expense ratio excludes Swiss Pension IFRS restatements, 9 months 2005 expense ratio excludes the curtailment gain from the change of the Swiss Pension scheme 102

103 Operational excellence supports the competitive position of our products Example: How we closely monitor our tariff position Frequency of ranking per customer segment/cluster 1,600 1,200 Zurich Peers 0 Rank Our new 2005 motor tariff is market leading in terms of segmentation Tariff reduction is refinanced by TZW Claims and a significantly improved risk selection Tariff refinement will be continued New motor tariff reflecting adequate risks New tariff for homeowners in preparation 103

104 Key take aways Germany and Switzerland Excellent distribution channel mix Strong underwriting performance Well established and sophisticated operating tools in place Very strong market position Significant cost improvements Powerful agent network and promising partnerships 104

105 Closing remarks Dieter Wemmer CEO Europe General Insurance

106 Key messages We are the 2 nd largest player in our chosen European markets with considerable scale advantage We are implementing Pan-European strategies and platforms to consolidate our competitive advantage throughout the value chain Our strengths across all distribution channels and our skills in customer segmentation generate profitable growth Management discipline and the Zurich Way initiatives underpin high profitability and stable earnings growth We have made substantial operating improvements to date and have a full pipeline of further initiatives 106

107 Q & A