Annual Results Reporting 2009

Transcription

1 Analysts and Media Presentation

2 Disclaimer and cautionary statement Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our targeted profit improvement, return on equity targets, expense reductions, pricing conditions, dividend policy and underwriting claims improvements, as well as statements regarding our 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 Financial Services Ltd or the Zurich Financial Services Group (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 our key markets; (ii) the risk of the global economic downturn and a 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 Financial Services Ltd and its Group and on whether the targets will be achieved. Zurich Financial Services 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. Farmers is a trade name and may refer to Farmers Group, Inc. or the Farmers Exchanges, as the case may be. Farmers Group, Inc., a management and holding company, along with its subsidiaries, is wholly owned by Zurich Financial Services Group. The Farmers Exchanges are three reciprocal insurers, Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange, including their subsidiaries and affiliates, owned by their policyholders, and managed by Farmers Group, Inc. and its subsidiaries. It should be noted that past performance is not a guide to future performance. 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.

3 Agenda Introduction Annual Results 009 Martin Senn Dieter Wemmer Q&A Closing remarks Martin Senn 3

4 Introduction Martin Senn Chief Executive Officer

5 Financial highlights in USD millions for the years ended December Change Business operating profit (BOP) 5,593 5,86 8% Net income attributable to shareholders 3,5 3,039 6% General Insurance combined ratio 96.8% 98.%.3pts Global Life new business value % Farmers Mgmt Services managed GEP margin 3 7.% 6.9% 0.3pts Shareholders' equity 9,678,03 34% Return on common shareholders' equity (ROE).6%.% 0.5pts Business operating profit (after tax) ROE 7.% 6.8% 0.4pts Throughout this document, certain comparatives have been restated. Refer to the audited Consolidated Financial Statements for details. After tax; change in local currency is 9%. 3 Margin on gross earned premiums of the Farmers Exchanges. Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services. 5

6 Business operating profit by segment in USD millions for the years ended December Change General Insurance 3,463 3,535 -% Global Life,477,490 -% Farmers (including Farmers Re),554,356 5% Other Operating Businesses % Total Core BOP 5,883 5,609 4% Non-Core Businesses % Total BOP 5,593 5,86 8% Throughout this document, certain comparatives have been restated. Refer to the audited Consolidated Financial Statements for details. 6

7 Proposed dividend of CHF 6 3 per share for 009 resulting in a payout ratio of 66% Dividends / EPS in respect of the business year (in CHF) Dividend 9.7 Share buyback per share.9 Dividend includes gross dividend and payout of nominal value reduction per registered share. Restated 3 Proposed gross dividend by the Board of Directors to the Annual General Meeting Diluted earnings per share 7

8 Summary Solid operating results driven by successful expense & market actions Sophisticated risk management Strong capital base and balance sheet Developing brand strength Attractive dividend Prepared for any future market conditions 8

9 Annual Results 009 Dieter Wemmer Chief Financial Officer

10 Business operating profit and net income by quarter Business operating profit in USD millions,000,500, ,764,785,76, ,00,06 636,346, ,49,447 44,53,660-46,57, Core BOP Non-Core BOP Q-08 Q-08 Q3-08 Q4-08 Q-09 Q-09 Q3-09 Q4-09 Net income attributable to shareholders and BOPaT in USD millions,000,500, ,47,33,398,54 435, ,5 89,,06 909,053 Q-08 Q-08 Q3-08 Q4-08 Q-09 Q-09 Q3-09 Q4-09 BOPaT Net income attributable to shareholders 0

11 General Insurance Key performance indicators in USD millions for the years ended December Change Change in LC GWP and policy fees 34,57 37,5-8% -4% Rate change 3.3% -.4% 4.7pts Loss ratio 70.9% 7.6%.6pts Expense ratio 5.9% 5.5% -0.4pts Combined ratio 96.8% 98.%.3pts Business Operating Profit 3,463 3,535 -% % Local Currency For details, please refer to specific notes on the following slide Rate Change Monitor.

12 General Insurance Rate Change Monitor for personal and commercial lines months 009 Discrete Q4 009 GC NAC EGI Int l Markets Total GI GC NAC EGI Int l Markets Total GI Personal Lines Commercial Lines n/a n/a 3% % 3% 5% % 3% 5% 4% n/a n/a 4% % 4% 4% % 6% 5% 4% EGI by country EGI by country Personal Lines Switzerland UK Germany % % -% Italy 3% Spain 3% Rest of EGI % Switzerland UK Germany 3% 7% 0% Italy 4% Spain 4% Rest of EGI % Commercial Lines 3% % 0% 3% 7% The Zurich Rate Change Monitor expresses the Gross Written Premium development due to premium rate change as a percentage of the renewed portfolio against a comparable prior period. In this slide, the shown periods 009 are compared to the same periods % 7% 7% 0% % 9% 7%

13 General Insurance Written Compounded Rate Change Personal Lines Commercial Lines Personal Lines Commercial Lines Personal Lines Commercial Lines Personal Lines Commercial Lines GC months 009 NAC EGI Int l Markets Total GI n/a n/a 3% % 3% 5% % 3% 5% 4% EGI by country UK Germany % GC 3% % % -% 0% Rest of Italy Spain EGI 3% 3% % 3% 7% months 008 NAC EGI Int l Markets 6% Total GI n/a n/a % % % -5% -3% % % -3% EGI by country UK Germany 9% -% % % Switzerland Switzerland -% -% Rest of Italy Spain EGI % 5% -% 0% 5% 6% General Insurance rate change % 0% -4% -.4%.% Q -0.4% -3.0% 4.% Q.% -0.7% 3.6% 3.0% Q3.% % Q4 4.9% Compounded Compounded rate change is the combined effect for the effective rate change in each quarter over the last two years, and is not annualized. For more details on our quarterly rate change, please refer to specific notes on the previous slide Rate Change Monitor. 3

14 General Insurance Underwriting actions improving the underlying loss ratio 5% General Insurance rate change % 3.6% 3.0% 3.7% 4.9% Of the rate increases achieved in 009, over half remains to be earned in 00..%.%.% Overall improvement of the underlying loss ratio of 0.4pts 0-4% -.4% Q -0.4% -3.0% Q -0.7% Q Compounded 009 estimated cumulative earned Q4 Corporate/Commercial NA +.5pts Corporate/Commercial Europe +.5pts Personal Lines Europe -.9pts Compounded rate change is the combined effect for the effective rate change in each quarter over the last two years, and is not annualized. For more details on our quarterly rate change, please refer to specific notes on the earlier Rate Change Monitor slide. 4

15 General Insurance Comparison of loss ratio 75% % Loss ratio development Last eight discrete quarters 70% 65% 67.4% 0.3% 3.7% 0.0% 6.9% 70.9% 67.8% 0.6% 4.%.8% 6.6% Underlying loss ratio 79.% 7.% 73.0% 69.9% 7.% 69.8% 70.0% 69.5% 60% 55% Underlying Loss Ratio USD 4m PY premium USD,074m PYD Major CAT 3 USD,0m Large Claims 4 Reported Loss Ratio Underlying Loss Ratio USD 58m PY premium USD,308m USD,059m The PY premium movements arises from loss sensitive business written in the US. The premium adjustments affect the denominator of the ratio, rather than the numerator. Prior year development. 3 Major CAT (potential USD 00m or greater). 4 Large claims are defined individually by our General Insurance Business Divisions, constantly applied over time, excluding Major CATs. PYD USD 556m Major CAT 3 Large Claims 4 Reported Loss Ratio 67.4% 67.% 66.% 66.% 69.5% 67.4% 70.3% 66.5% Q Q Q3 Q4 Q Q Q Q4 5

16 General Insurance Net expense ratio walk from m08 to m09 5.5% 5.9% Other tech 3.% 3.3% expenses Change year-over-year 0.08% 0.36% 0.34% -0.06% Expense ratio development Last eight discrete quarters 6.6% 4.7% 4.7% 5.% 5.7% 6.7% 5.5% 5.%.3% Commissions.6% Commissions Premium Tax Other UW expenses Total change Q08 Q08 Q308 Q408 Q09 Q09 Q309 Q409 m08 Expense Ratio m09 Expense Ratio Adjusted for the PY premium movements from loss sensitive business written in the US. The premium adjustments affect the denominator of the ratio, rather than the numerator. Total premium adjustment is USD 58m and USD 4m for 008 and 009 respectively. As reported the expense ratio is 6.% and 7.% for Q408 and Q409 respectively. 6

17 Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions Net reserves for losses and LAE, as of January Net losses and LAE paid Net losses and LAE incurred - Current year - Prior years Foreign currency translation effects & other Net reserves for losses and LAE, as of December ,986-3,689 5,698 -,059,967 55, ,7 -,50 5,46 -,7-3,70 5,986 Of which within General Insurance: USD,074 million and USD,308 million for the full year 009 and 008 respectively. 7

18 Global Life key performance indicators in USD millions for the years ended December Change Change in LC GWP and policy fees (incl. insurance deposits) 6,09,873 9% 8% Net inflows to Assets under Mgmt 5bn -bn nm Annual Premium Equivalent (APE) 3,667 3,6 % 9% New business value, after tax % 9% New business margin, after tax 3.3% 3.% -.8pts MCEV operating return 4 4.9%.5%.4pts 3% Closing MCEV 6,75,88 Business Operating Profit,477 Local Currency Global Life numbers include gross written premiums, policy fees and insurance deposits. 3 New Business Value as % of APE. 4 After tax and before currency translation effects.,490 -% 5% 8

19 Global Life new business by pillar in USD millions for the years ended December 3 APE 009 APE 008 Change Change in LC Bank Distribution, % 55% IFA/Brokers % % Agents % -3% Corporate Life & Pensions % 60% International / Expats % -8% Private Banking Client Solutions 86 nm nm Direct and Central Initiatives % -64% Total 3,667 3,6 % 9% Local currency 9

20 Global Life Business Operating Profit: Profit by Source in USD millions for the years ended December Change Change in LC Net Expense margin % 49% Net Risk margin % 9% Net Investment margin % 0% Other profit margins % -53% BOP before interests, depreciation and amortization,805,788 % 7% Interest, depreciation, amortization and non controlling interest % -9% Business Operating Profit,477,490 -% 5% Note: Restructuring provisions and other items not relevant for BOP are netted in the corresponding line item. 0

21 Farmers key performance indicators in USD millions for the years ended December Change Farmers Management Services Managed gross earned premium margin 7.% 6.9% 0.3pts Business operating profit,36,0 0% Farmers Re Business operating profit % Farmers Exchanges Gross written premiums (indicative) 3 7,60 6,70 5.4% Surplus ratio 43.0% 36.4% Includes results from st Century/Personal Auto Group (stc/pag) since July, 009 when transaction closed. Margin on gross earned premiums of the Farmers Exchanges. Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services GWP excludes the USD 45m portfolio transfer of Zurich Small Business unearned premiums. 6.6pts

22 Acquisition of st Century Update GWP in USD m GWP by distribution channel (Direct vs Agency) Combined ratio analysis (in %) Q Q Q3-07 Q4-07 Q- 08, Q-09 Q-09 Q3-09 Q- 08 Q3-08 Q4-08 Q- 09 Combined ratio st Century Q4-09 Q- 09 Agency Direct Acquisition of st Century/Personal Auto Group (stc/pag). Transaction closed on July, 009. All stc/pag financial information excludes discontinued operations. Combined ratio adjusted for profit portion of management fees. 3% 87% Q3-09 Q4-09 GWP for FY09 of USD.4bn reflects: Direct: negative residual effect of legacy brand issues and deteriorating US economy levels stabilizing Agency: high lapse rates, low new business due to legacy brand issues and integration into Foremost Combined Ratio for FY09 totaled 00.6% and 98.8% post acquisition The combined ratio post acquisition (Q3-09 & Q4-09) was 98.8% as a result of continued management of underwriting, pricing actions and favorable underlying frequency trends. Cross-sell to Farmers Exclusive Agents in pilot for states. Significant dedicated effort focused on rolling out into additional states in 00.

23 Other Operating and Non-Core Businesses Business operating profit contribution in USD millions for the years ended December Change Other Operating Businesses % of which: subordinated debt buy-back 0 - nm Non-Core Businesses - Banking activities nm - Centrally managed businesses % - Other run-off 70 0 nm of which: Centre nm Total Non-Core Businesses % 3

24 Investment performance of Group investments in USD millions for the years ended December Change Net investment income 7,505 8,698-4% Net capital losses/gains on investments and impairments -,43 -,893 5% of which attributable to shareholders -,375 -,0 35% Net investment result 6,08 5,805 5% Net investment result in % 3.% 3.% 0.pts Movements in net unrealized losses on investments included in shareholders equity 3 5,674-3,90 nm Total net investment return Including impairments of USD,394m (FY08: USD,457m). In % of average investments. 3 Before attribution to policyholders and other. 6.3%.0% 5.pts 4

25 Development of shareholders equity in USD millions, as of 30,000 8,508, ,678 5,000 5,,03,57 0,000 5,000 0,000 Dec 3, 008 Mar 3, 009 Jun 30, 009 Sep 30, 009 Q4-09 Net Income attributable to shareholders Other changes in Q4-09 Dec. 3, 009 5

26 00 estimated economic and regulatory solvency Statutory solvency ratio (Group s Solvency I ) Economic solvency ratio 3 60% 09% +6pts -7pts 98% 95% 39% +4pts -7pts 36% Dec Sept Impact Q4-09 Impact from dividend Dec Jan. est. for 009 Sept. 30 est. for 009 Movements in Q4-09 AFR and expected 00 RBC Impact from dividend 4 4 Jan. est. for 00 Solvency I requirements in accordance with the Swiss insurance supervisory law. Finalized and as filed with the Swiss regulator; after dividend. 3 Economic financial strength is based on Available Financial Resources (AFR) at the beginning of the period and expected risks to be taken during the period (RBC). Economic financial strength is based on AA calibration. 4 Proposed gross dividend by the Board of Directors to the Annual General Meeting 00. 6

27 Attractive CHF 6 dividend for 009 Book value per share (in CHF) Dividends (in CHF) Dividend yield 3 Payout ratio 4 5 8% 3% 0 0% Proposed gross dividend of CHF 6 by the Board of Directors to the Annual General Meeting 00. Dividend includes gross dividend and payout of nominal value reduction per registered share. 3 Compared to the close price of the day before the ex-dividend date, except for 009 for which year-end close price was considered. 4 Payout includes share buy-backs of USD bn each in respect of 006 and Restated 7% 6% 5% 4% 3% % % 0% 70% 60% 50% 40% 30% 0% 0%.3% 3%.8% 9%.6% 6% 3.% % 4.5% 7% 5.6% 47% 7.% % % % 7

28 Summary Solid operating results driven by successful expense & market actions Sophisticated risk management Strong capital base and balance sheet Developing brand strength Attractive dividend Prepared for any future market conditions 8

29 Q&A 9

30 Closing remarks Martin Senn Chief Executive Officer

31 Appendix 3

32 Zurich is poised for profitable growth 9% 9% 3% Focus on volume growth Farmers Global Life EGI -% IM NAC Focus on margin enhancement -% GC Legend for GI BDs IM International Markets EGI Europe General Insurance GC Global Corporate NAC North America Commercial Volume growth measured as growth in fee income for Farmers Management Services, growth in APE in local currency for Global Life and GWP growth in local currency for General Insurance. -% 3

33 The Zurich Way The Zurich Way Target of USD 0.9 billion annually for 00 and 0 USD 500m USD 700m USD 800m USD 900m USD 900m USD 900m We have comfortably achieved our 009 target. Developing our plan, we expect benefits of USD 0.9 billion for 00 and 0 7 major TZW workstreams with continuing focus on Profitable Growth and Operational Transformation initiatives Expected contribution to key performance indicator for 00 & 0: General Insurance: Combined ratio: - 3pts p.a. 33

34 The Zurich Way initiatives 00 target by function USD 900 m USD 900 m by business division USD 900 m USD 900 m USD 800 m 3% 7% 34% 7% 3% 30% 33% 3% 8% Growth/ Distribution Claims U/W USD 800 m 35% % 7% % 4% % % 5% 33% 9% 3% 4% 5% % 5% % 8% Expenses 9% % Europe General Insurance North America Commercial Global Corporate Global Life Other 34

35 Top line development by segment in USD millions for the years ended December Change Change in LC General Insurance GWP and policy fees 34,57 37,5-8% -4% Global Life GWP and policy fees (incl. insurance deposits) 6,09,873 9% 8% Annual Premium Equivalent (APE) 3 3,667 3,6 % 9% Farmers Farmers management fees,690,458 9% 9% Farmers Re GWP 6,65 Local Currency Global Life numbers include gross written premiums, policy fees and insurance deposits. 3 Gross new business annual premium equivalent (APE). 3,38 96% 96% 35

36 Business division BOP-ROE based on RBC-allocated IFRS equity for the years ended December 3 General Insurance Global Corporate North America Commercial Europe General Insurance International Markets GI Global Functions including Group Reinsurance Global Life Farmers Other Operating Businesses Non-Core Businesses %.7% 4.4% 3.9% 0.4% 8.5%.5% 48.4% -36.4% -.5% %.6% 5.6% 4.6% 8.9% 6.6% 5.% 5.9% -85.7% -6.5% Total Group Total Group BOP (after tax) ROE.0% 7.% Adjusted BOP-ROE based on average IFRS Group equity allocated to the segment based on its share of Zurich risk based capital (RBC). Business operating profit (after tax) return on common shareholders equity. 0.7% 6.8% 36

37 Development of shareholders equity in 009 in USD millions 30, ,678 9,000 3,9 8,000 7,000 6,000 5,000 3,5 4,000,96,408 3,000,000,03,000 0,000 9,000 Balance as of Dec 3, 008 Issuance of share capital & treasury share transactions Dividends Net Income attributable to shareholders Change in net unrealized gains/losses on investments Includes changes in cash flow hedges and share-based payment transactions and other. Cumulative Translation Adjustments Net actuarial gains/losses on pension plans Other movements Balance as of Dec. 3,

38 00 estimated economic and regulatory solvency Statutory solvency ratio / Group s Solvency I What if scenarios Dec. 3, 08 Sep. 30, 09 Impact Q4-09 Dividend 4 Dec 3, 09 Debt securities at cost -5pts 60% 09% +6pts -7pts 98% GI DAC +4pts Economic solvency ratio 3 ~95% ~39% +4pts Impact of AFR movements in Q4-09 and expected RBC changes for 00-7pts Impact of dividend 4 ~36% Impact 0bps liquidity premium 5 Impact 00bps liquidity premium 5 +pts +7pts January est. for 009 Solvency I requirements in accordance with the Swiss insurance supervisory law. Finalized and as filed with the Swiss regulator; after dividend. 3 Economic financial strength is based on Available Financial Resources (AFR) at the beginning of the period and expected risks to be taken during the period (RBC). Economic financial strength is based on AA calibration. 4 Proposed gross dividend by the Board of Directors to the Annual General Meeting Impact on Available Financial Resources. 0bps sensitivity consistent with new industry disclosure practice. 00bps sensitivity provided for comparison to prior quarter. September 30 est. for 009 January est. for 00 38

39 Updated economic solvency view for 00 in USD billions Available Financial Resources (AFR) Estimated AFR as of September 30, Movements in Q Proposed dividend 00 - January estimate for 00 AFR + 4 Risk Based Capital (RBC) Estimated RBC as of September 30, Movements in Q Expected RBC changes for 00 January estimate for 00 RBC + 30 Approximated and rounded. Proposed gross dividend by the Board of Directors to the Annual General Meeting 00. Estimated 00 economic solvency ratio ~36% 39

40 Strong economic solvency in USD billions (rounded) Change from EV to MCEV Available to policyholders RBC AFR Jan. 003 RBC AFR Jan. 004 RBC AFR RBC AFR RBCAFR RBC AFR RBC AFR RBC AFR Jan. 005 Jan. 006 Jan. 007 Jan. 008 Jan. 009 Jan. 00 est. Economic financial strength is based on available financial resources (AFR) at the beginning of period and expected risks to be taken during period (RBC). 40

41 Zurich RBC by segment and risk type for 00 Capital Allocation: USD 3 billion,4 Total RBC estimate: USD 30 billion Farmers Other 0% 7% Global Life 3% General Insurance 60% 8% % % 5% 3% 30% 6% 8% Market/ALM risk Operational risk Business risk P&R risk 3 Re-ins credit risk Life insurance risk Natural cat risk Investment credit risk Total allocated capital = USD 30bn RBC plus USD bn direct allocation to Farmers Management Services. Includes Other Operating Business and Non-Core Businesses. 3 Premium & reserving risk. 4 Reflects current management structure between General Insurance, Other Operating Business and Non-Core Businesses. 4

42 Estimation of Available Financial Resources (AFR) as of January, 00 in USD billions (rounded) () () 8 0 (6) Reported shareholders' equity Proposed distributions Net Net intangibles 3 shareholders' equity Value of inforce business and RBC adjustments Financial debt Total AFR Capital allocation to Farmers Proposed dividend. Shareholders intangible assets adjusted for taxes less deferred front-end fees and deferred tax liabilities. 3 All debt issues (senior and subordinated) excluding those classified as operational debt or maturing within one year. Net AFR 4

43 Group s Solvency I calculation in USD millions Dec 3, Sep 30, 009 Jun 30, 009 Mar 3, 009 Dec 3, 008 finalized Eligible equity Total equity 3,478 30,33 6,94 3,850 3,78 Net of intangibles and other assets -7,546-7,35-7,35-6,53-6,7 Free reserves for policyholder dividends,799,987,083,700,35 Subordinated debt 4,53 4,35 4,03 3,575 3,683 Deferred policyholder acquisition costs non-life insurance -3,054-3,53-3,090 -,86 -,793 Dividends, share buy-back and nominal value reduction -, ,36 -,4 Total eligible equity 5,604 6,967,803 8,45 9,369 Total required solvency capital,93,894,695,76,4 Excess margin Solvency ratio,67 98% 4,07 09% Including entire impact of st Century/Personal Auto Group transaction, which closed on July, 009. Finalized and as filed with the Swiss regulator. 3 Current estimate. 0,08 80% 6,689 57% 7,7 60% 43

44 Group s Solvency I - sensitivities Solvency I ratio impact (in %) 00% 50% Monetary impact on IFRS equity as of Dec 3, 009 (in USD bn) Base case 98% Interest rate +00 bps 67% -4.0 Interest rate -00 bps 3% 4.4 Equity markets -0% Credit spreads +00 bps 90% 89% Solvency I requirements in accordance with the Swiss insurance supervisory law. The impact on unit-linked business is not included, as policyholders bear the investment risk. The impact on changes to the required capital is not included in the sensitivities for the Solvency I ratio. For further details, please refer to the respective section of the Risk Review. 44

45 General Insurance key performance indicators Business operating profit Combined ratio (%) in USD millions for the years ended December 3 Global Corporate North America Commercial Europe General Insurance ,43,0,38,864 0% -40% International Markets % Other % Total 3, ,535 Change nm -% 3 Global Corporate NA Commercial Europe General Insurance Int l Markets Total CAT. CAT.8 CAT 7.5 GI Global Functions, Group Reinsurance and inter-segment eliminations. Including GI Global Functions, Group Reinsurance and inter-segment eliminations. 3 Equivalent to +% in local currency FY09 FY08 45

46 Non-life ultimate loss ratios by accident year Cumulative incurred net loss ratios In the year 8.4% 70.6% 67.% 68.3% 73.3% 69.6% 7.7% 74.6% 7.3% year later 85.7% 7.0% 66.% 64.% 68.% 66.% 7.7% 74.% years later 85.8% 7.3% 65.4% 63.5% 66.6% 64.8% 70.6% 3 years later 87.4% 74.5% 65.5% 63.7% 65.0% 63.3% 4 years later 88.5% 74.7% 65.7% 6.9% 63.8% 5 years later 90.% 73.4% 65.0% 6.% 6 years later 90.% 74.3% 64.6% 7 years later 90.3% 8 years later 90.6% In % of net earned premiums in that year 74.% 46

47 Asbestos and environmental reserves Gross reserves USD m 3-year survival ratio Gross reserves USD m 3-year survival ratio Asbestos 3, , General Insurance 3,6 34., of which: US of which: UK, , Other Businesses Environmental Total 3,884 3,333 3-year survival ratio for the UK on a local currency basis. Survival ratios were impacted by commutations in Other Businesses both in 008 and 009. Adjusting for these commutations survival ratios would be estimated to 3.0 (009) and 4.9 (008) for Total Asbestos and 6. (009) and 3.9 (008) for Other Businesses. 47

48 Global Life Business Operating Profit: Profit by Source (/) in USD millions Net Expense margin Net Risk margin Net Investment margin Other profit margins BOP before interests, depreciation and amortization Interest, depreciation, amortization and non controlling interest Business Operating Profit Americas UK Germany Switzerland Note: Restructuring provisions and other items not relevant for BOP are netted in the corresponding line item

49 Global Life Business Operating Profit: Profit by Source (/) In USD millions Ireland Spain Emerging Rest of Total Markets World Net Expense margin Net Risk margin Net Investment margin Other profit margins BOP before interests, depreciation and amortization ,805,788 Interest, depreciation, amortization and non controlling interest Business Operating Profit Note: Restructuring provisions and other items not relevant for BOP are netted in the corresponding line item ,477,490 49

50 Global Life Profit by Source: Definitions + Net Expense margin Fund and non-fund based fees, acquisition and maintenance expenses, movements in acquisition expense and fee intangibles, surrender charges, and any related policyholder bonuses + Net Risk margin Mortality, morbidity, and longevity premiums and benefits, reinsurance result, and any related policyholder bonuses Business Operating Profit + Net Investment margin Spread between investment income and interest credited, the return on free surplus and any related policyholder bonuses + - Other profit margins Interest, depreciation, amortization and non controlling interest Includes profits from non-insurance businesses, business not modeled on profit by source basis, and financial reinsurance Interest on funding, depreciation of fixed assets, amortization of present value of profits of acquired insurance contracts and distribution agreements, and minority interest Note that each source of profit is reported net of any items not included in BOP, for example restructuring provisions. 50

51 Global Life new business indicators in USD millions for the years ended December 3 APE 009 APE 008 Change Change in LC NBV 009 NBV 008 Change Americas, of which % % 36 % US Latin America United Kingdom Germany Switzerland Ireland Spain Emerging markets % 3% -% -0% -4% -5% 4% -3% 44% 6% -5% -4% 0% 54% % 9% 6% -46% -35% 3% 54% in Asia Rest of the world Total Local Currency New business value, after tax , ,6 0% 69% % -4% 79% 9% % 4% 4% 5

52 Global Life Embedded Value result for the years ended December 3 Opening Embedded Value 5 Operating variance, Return 4 New business value Expected contribution, Total operating earnings Economic variance and other Embedded value earnings Dividends and capital movements 6 Foreign currency effects (fx) Closing Embedded Value after fx 009 USD m,890,9,67 3, ,75 4.9% 4.0% 008 USD m 5,93 67,983-3,558 -, ,633, Return 4.5% -9.9% Operating earnings expected from in-force and net assets. After tax 3 Other operating variance also Includes global development expenses, where significant development work is performed in one country that is intended to have wider application across Global Life. 4 Annualized on a linear basis assuming no further variances in the remainder of 009 and 008, respectively. 5 Including dividends & capital movements start of period. 6 Dividends & capital movements end of period. 5

53 Global Life New Business Value by pillar Global distribution and proposition pillars drive new business value New Business Value New Business Value NB Margin : USD 753 million 5% 9% 8% 9% 9% 0% 009: USD 78 million Bank Distribution 7% % IFA/Brokers 8% Agents 38% 5% % 3% 4% 4% % Corp. Life & Pensions 7% International/ Expats 3% Direct & central initiatives 4% Private Banking Client Solutions 7% 53

54 Global Life - Assets under Management AuM increased mainly due to the increase of the market value of assets, the currency translation but also the strong net inflows Split of AuM in USD billions Development of AuM in USD billions Balance as of Jan, 009 Inflows Outflows Dec 3, 09 Group Investments 3rd party Investments 66 Dec 3, 08 UL Investments Market movements & other Currency translation Balance as of Dec 3, 009 Assets under Management comprise the Group and unit-linked investments that are included in the Global Life balance sheet plus assets that are managed by third parties, for which we earn fees. Other includes dividends, charges levied on Assets under Management, and other changes in invested assets including reinsurance impact

55 Farmers Farmers Management Services key performance indicators in USD millions for the years ended December Change Management fees and other related revenues,690,458 9% Management and other related expenses -,399 -,37-6% Gross management result,9,4 3% Managed gross earned premium margin 7.% 6.9% 0.3pts Business operating profit,36,0 0% Includes results from st Century/Personal Auto Group (stc/pag) since July, 009 when transaction closed. Margin on gross earned premiums of the Farmers Exchanges. Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services. 55

56 Farmers Farmers Re key performance indicators in USD millions for the years ended December Change Gross written premiums Net underwriting result 58 6,65 3, % -3% Combined ratio 99.0% 97.5% -.5pts CAT impact 3.4%.% -.3pts Business operating profit % Includes the portfolio transfer (of USD 970m) related to the increase in participation in the All Lines Quota Share (QS) reinsurance treaty from 5% to 37.5% effective June 30, 009 (including the stc/pag business). Also includes the increase in participation in the All Lines QS treaty from 5% to 5% effective Sep. 30, 008. Effective December 3, 009, the participation in this QS treaty has been reduced to 35%. As defined by the Farmers Exchanges. 56

57 Farmers Exchanges key performance indicators in USD millions for the years ended December Change Gross written premiums 7,60 6,70 5.4% Net underwriting result n/m Combined ratio % 05.7% 6.8pts Adjusted combined ratio 4 9.3% 98.4% 7.pts CAT 5 impact 4.7% 9.0% 4.3pts Surplus ratio 43.0% 36.4% 6.6pts Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services. 008 GWP excludes the USD 45m portfolio transfer of Zurich Small Business unearned premiums. 3 Before Quota Share treaties with Farmers Re. 4 Adjusted for profit portion of management fees. 5 As defined by the Farmers Exchanges. 57

58 Integration of st Century shows rapid progress Farmers has moved aggressively to restructure/integrate businesses: Agency Auto integration into Foremost effective Sep., 009 Rationalization of Direct operations (Woodland Hills, CA / Vestal, NY) Other back-office transition integration completed by year end (investments, treasury, accounts payable, etc.) Q3 & Q4 FMS restructuring charge of USD 45m primarily severance & lease obligations Reduced ~40 FTEs and relocated additional ~80 FTEs to lower cost areas Expected annual run rate savings of USD 45m Continued integration into 00 including data centers, IT applications and claims operations 00 charges under review FMS goodwill at approx. USD 440m as of Dec. 3, 09, subject to further refinement upon finalization of pension liability (Q-0) Transaction on track to achieve planned EPS accretion in year 58

59 st Century - contribution in USD millions for the year ended December 3 Farmers Management Services: Management fees and other related revenues Management and other related expenses Gross management result Business operating profit Farmers Exchanges: Gross written premiums Adjusted combined ratio , % Acquisition of st Century/Personal Auto Group (stc/pag). Transaction closed on July,

60 Farmers Exchanges financial highlights in USD millions for the years ended December 3 Gross written premiums Net underwriting result 3 Net surplus growth Ending surplus 009 7, , , ,035 6'000 5'000 4'000 3'000 ' % 4.0% 40.0% 38.0% 36.0% 34.0% Surplus ratio 43.0% 36.4% ' % % Surplus Notes Surplus Ratio As of the end of the period Paid in Capital & Unassigned Surplus Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services. 008 GWP excludes the USD 45m portfolio transfer of Zurich Small Business unearned premiums. 3 Before Quota Share treaties with Reinsurance Farmers. 60

61 Farmers Exchanges gross written premiums by line of business in USD millions for the years ended December Change Auto 9,8 8, % Homeowners 4,6 4, % Commercial P&C,33,83.3% Small Business Solutions % Workers Compensation % Specialty,587,563.5% Other % Total 7,60 6,70 5.4% Includes USD,00 million of premiums from st Century/Personal Auto Group (stc/pag) since July, 009 when transaction closed. 008 GWP includes Zurich Small Business results from the acquisition date of June, 008 but excludes the USD 45m portfolio transfer of Zurich Small Business unearned premiums. 6

62 Farmers Exchanges premium growth outperforming industry GWP growth 8% 6% Industry Growth Rate 008: -.3% 009 Forecast: -0.5% 5.4% 5.7% 5.0% 5.% 4.6% 6.5% 6.%5.7% 4.7% 5.4% 4% 3.% 3.3% 3.% %.4%.%.8% 0% 3 months 006 Half year months 006 Full year months 007 Half year months 007 Full year months 008 Half year months 008 Full year months 009 Half year months 009 Full year 009 Source of FY09 estimate: Conning Property-Casualty Forecast & Analysis By Line Of Insurance Q309 released /07/0 (weighted for Farmers LOBs). Excludes pre-acquisition premiums and portfolio transfers in 007, 008 and 009 related to the Bristol West, Zurich Small Business and st Century acquisitions, respectively. 6

63 Farmers Exchanges combined ratio for the years ended December Change Auto 96.8% 99.%.4pts Homeowners 0.5% 9.8% 8.3pts Commercial P&C 94.9% 96.0%.pts Small Business Solutions % 6.%.pts Workers' Compensation 99.% 95.8% -3.4pts Specialty 03.5% 07.9% 4.4pts Total 98.9% 05.7% 6.8pts Adjusted combined ratio 4 9.3% 98.4% 7.pts CAT 5 impact 4.7% 9.0% Before quota share treaties with Farmers Re. Includes stc/pag results since July, 009 when transaction closed combine ratio reflects results from June September only as Zurich Small Business was assumed on June, Adjusted for profit portion of management fees. 5 As defined by the Farmers Exchanges. 4.3pts 63

64 Farmers Exchanges development of the combined ratio Quarterly combined ratio 0% 5% Other Cats 0% Midwest Cats Gustav 05% 00% California wildfires Florida hurricanes Rita Katrina California wildfires Ike Other Cats Texas Hail CO/TX Hailstorms 95% 90% 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

65 Competitor snapshot Farmers continues to outperform key competitors Sep. 30, 009 (9m) Dec. 3, 009 (m) FY09 Industry Estimate Growth vs. GAAP combined ratio overall P&C, 5 Industry 6 Growth 0 00.% NPW % GEICO 4 8 Liberty Mutual 5 : 009 YTD NPW growth = +5.6% (reflects the Q3-08 acquisition of Safeco) 009 YTD CR (STAT) = 04.% Farmers, 3 Progressive Travelers Allstate Hartford Mercury Nationwide 5 State Farm 5 American Family 5 Industry 6-0.5% Combined ratio (% NPE) Source: Press releases and investor supplements, except for Farmers and non-public competitors. Reflects GWP before APD and Quota Share treaties. Combined ratio excludes APD and Quota Share reinsurance agreements and is adjusted for Farmers Management Services profit portion of management fees. 3 Farmers results include SBS and C. SBS 008 results exclude the portfolio transfer. C 009 results exclude the portfolio transfer. 4 Based on NPE. GEICO does not report NPW on a quarterly basis. 5 Source for non-public competitor data: AMBest database. CRs on STAT basis. Liberty Mutual s CY results reflect acquisition of Safeco. 6 Source of FY09 estimate: Conning P&C Forecast & Analysis By Line of Insurance Q409 released /7/00 (weighted for Farmers LOBs). CR on STAT basis. 65

66 Zurich s investment portfolio profits greatly from diversification and is balanced in terms of risk Risk Allocation of Zurich s investment portfolio FY 009 Asset allocation (%) Real Estate Equities Cash, short term Hedge Funds / Private Equity Fixed income Risk diversification and matching (%) Risks to Zurich s economic net ALM position measured as months value at risk with 99.95% confidence interval. 00 Sum of single security risks (before diversification) 38 Investment risks only (diversified) 7 Investment risks relative to liabilities Risk exposure (%) Real Estate Credit 4 Hedge Funds Equities Interest rate 66

67 Group Investments Zurich s debt securities are of consistently high quality (98% investment grade) As of December 3, 009 Group Investments USD 96bn Debt securities USD 36bn credit rating: AAA 5.7% Other asset classes Debt securities 98.4% investment grade credit rating: AA 3.0% 3% 69% credit rating: A 7.0% Unrated/below inv. grade.6% credit rating: BBB 6.7% 67

68 Group Investments Zurich s debt securities are well balanced Group Investments - USD 96bn (00%) As of December 3, 009 Government and supranational bonds: USD 5bn (7%) Market/Cost : 0% of which: 99% inv. grade 48%in General Insurance 69% AAA 45% in Global Life % AA 7% A % BBB Debt securities 69% of which: 36% in General Insurance 57% in Global Life Corporate bonds: USD 6bn (30%) Market/Cost : 0% 99% inv. grade 6% AAA 7% AA 43% A 3% BBB Other asset classes 3% Market value to Cost value ratio of which: 69% in General Insurance % in Global Life MBS/ABS: USD 4bn (%) Market/Cost: 98% 96% inv. grade 84% AAA 68

69 Group Investments Government & supranational bonds are well diversified Group Investments - USD 96bn (00%) As of December 3, 009 Government and supranational bonds: USD 5bn (7%) Market/Cost: 0% of which: 99% inv. grade 49% in General Insurance 69% AAA 44% in Global Life % AA 7% A % BBB Debt securities 69% Other asset classes 3% Split by countries: % US 0% UK 6% Italy % Switzerland 6% Germany 6% France 5% Spain 4% Canada % Austria % Ireland 69

70 Group Investments Zurich s Corporate bonds are of high quality Group Investments - USD 96bn (00%) As of December 3, % = USD 6bn Debt securities 69% Other asset classes 3% Split by industries 45% Banks, including 6% covered bonds 9% Cities, Agencies, Cantons, Provinces, including % covered bonds 6% Utilities 7% Financial Institutions, including % covered bonds 4% Telecom 3% Oil & gas 3% Conglomerates 3% Insurance % Pharmaceuticals Corporate bonds: USD 6bn (3%) Market/Cost: 0% Split by credit rating 99% inv. grade 6% AAA 7% AA 43% A 3% BBB Split by country/region 30% US 7% UK 5% Germany 6% Spain 6% France 3% Switzerland 5% Rest of Europe 70

71 Group Investments Banks Corporate bonds are of high quality and well diversified Group Investments - USD 96bn (00%) As of December 3, 009 Banks Corporate bonds: USD 8bn (4%) Market/Cost: 00% Split by seniority 36% Covered bonds 49% Senior bonds 4% Subordinated of which: 3% Tier Split by credit rating 00% inv. grade 39% AAA 3% AA 44% A 3% BBB 00% = USD 8bn Debt securities 69% Other asset classes 3% of which: 30% in General Insurance 66% in Global Life Split by country/region 35% Germany 0% U.S. % Spain 5% France 5% U.K. 4% Netherlands 4% Switzerland 3% Italy 7

72 Group Investments Split of total MBS/ABS of USD 4bn (%) Group Investments USD 96bn (00%) includes: MBS/ABS: USD 4bn (%) Market/Cost: 97% 96% inv. grade 84% AAA US MBS: USD 5.7bn (8.0%) Market/Cost: 00% 96% inv. grade; 89% AAA Debt securities 69% Other asset classes 3% As of December 3, 009 US ABS in addition to the US MBS mentioned above US ABS : USD.7bn (.4%) Market/Cost: 0% 97% inv. grade, 76% AAA e.g. Automobile and Credit Card ABS UK MBS/ABS: USD.6bn (.3%) Market/Cost: 84% 97% inv. grade; 7% AAA Commercial MBS of USD 0.8bn (40% AAA) Whole Loan Residential MBS USD.4bn (9% AAA) German ABS: USD 0.3bn (0.%) Market/Cost: 04% 00% inv. grade; 76% AAA mostly German MBS ( Pfandbriefe ) Swiss MBS: USD 0.8bn (0.4%) Market/Cost: 05% 00% AAA 00% Swiss MBS ( Pfandbriefe ) 7

73 Group Investments Split of US MBS of USD 5.7bn (8.0%) Group Investments USD 96bn (00%) US-MBS: USD 5.7bn (8.0%) Market/Cost: 00% 96% inv. grade 89% AAA Debt securities 69% of which: US Agency MBS: USD 9.7bn (5.0%) Market/Cost: 03% 00% AAA USD.0bn backed by GNMA USD 8.7bn backed by FNMA and FHLMC Other asset classes 3% As of December 3,009 US Commercial MBS: USD 4.6bn (.3%) Market/Cost: 96% 99% inv. grade 8% AAA US Whole Loan Residential MBS: USD.4bn (0.7%) Market/Cost: 93% 55% inv. grade 40% AAA 73

74 Group investments capital losses in P&L Net capital losses/gains on investments and impairments (in P&L) in USD millions 500 Equity investments Debt investments Other investments of which: impairments in USD millions 500 Equity investments Debt investments Other investments Q-09 Q-09 Q3-09 Q4-09 FY09 Total -, ,43 of which in: - GI 35% 5% nm nm 40% - GLife 33% 46% 79% 46% 34% of which: - attributable to shareholders , Q-09 Q-09 Q3-09 Q4-09 FY09 Total ,394 of which in: - GI 6% 4% 49% 5% 53% - GLife 3% 36% 8% 7% 8% 74

75 Group investments unrealized gains / losses Change in net unrealized gains / losses on investments incl. in shareholders equity in USD millions , , ,37 Q-09 Q-09 Q3-09 Q4-09 FY09 Total -,48,09 5, ,674 of which in: - GI 7% 57% 46% nm 59% - GLife 67% 4% 49% 89% 4% of which: - attributable to shareholders -689,38, ,9 944 Before attribution to policyholders and other After attribution to policyholders and other ,60 4,090-7 Equity investments Debt investments Other investments 75