Half year results 2014

Transcription

1 Half year results 04 Analysts and Media Presentation August 7, 04 Zurich Insurance Group

2 Key messages Martin Senn, Chief Executive Officer

3 Key financials On track with our key targets HY-4 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD BOP USD.6bn BOPAT ROE HY-4 Target.5% - 4% Z-ECM Q-4 Target 8% 00 0% NIAS USD.bn Net cash remittances FC FY-4 Cumulative 3-year target > USD 3.5bn > USD 9bn Business operating profit after tax return on equity (annualized), excluding unrealized gains and losses. Zurich Economic Capital Model (Z-ECM), subject to the review and approval of the Group s regulator, the Swiss Financial Market Supervisory Authority (FINMA). 7 August 04 Half year results 04 3

4 Report card Group Early days, but good progress GROUP STRATEGY ACTIONS UNDERWAY IN HY-4 Prioritizing investment in distinctive positions Corporate: further enhancing combined GC / CLP model, on track to achieve >00 new common customers in 04 Commercial: customer segmentation and analytics initiatives at NAC Select retail: completed segmentation in 5 markets, extension of Banco Sabadell exclusive distribution agreement Managing other businesses for value Good progress with GI turnaround/exits Holistic approach to in-force management developed for UK, Germany and US Life operations, including structural options 3 Growing our operating earnings Streamlining of organizational structure largely complete, USD 50m run-rate cost savings to be achieved by end of 05 Additional risk capital deployed in Investment Management 7 August 04 Half year results 04 4

5 Report card General Insurance Improving AY profitability, executing on turnarounds PRIORITY MARKETS MANAGE FOR VALUE GWP (USDm) 9,53 9,995 3,56 3,45,708,76 BOP (USDm), , Exit from Zurich-branded UK aggregator distribution in April Sale of Russia retail business in July Turnaround actions progressing in other markets 5,9 5,46,9,496 NEXT STEPS 8,070 8,393 HY-3 HY-4 Non-Priority & Other Retail Corporate Commercial -5 HY-3 HY-4 Other Turnaround / Exit Continue as is Priority Continue to drive improved accident year profitability Complete improvement plans Prioritize initiatives to deliver growth in select markets GWP adjusted for discontinued large fronting contract. 7 August 04 Half year results 04 5

6 Report card Global Life Growing in priority markets, in-force management initiatives underway PRIORITY MARKETS MANAGE FOR VALUE APE (USDm),373, HY-3 HY-4 Manage for Value Priority Retail Corporate Life & Pensions Bank Distribution NBV (USDm) HY-3 HY-4 Exit of marginal positions (Taiwan, CLP Australia, Luxembourg) Initiatives underway to deliver up to USD 00m BOP increase from in-force management initiatives in Germany, the UK and the US NEXT STEPS Illustrative walk to quarterly BOP > USD 350m in 06 (USDm) 300 Current 5-0 VIF unwind 0-5 In-force Mgmt Priority market growth 0-5 Other ID View Complete phase of in-force management initiatives Enhance external reporting 350 Actual reported HY-3 NBV was USD 547 million; pro-forma HY-3 figure of USD 495 million is normalized for 04 assumption changes. Directional view from 03 Investor Day (ID) does not represent a financial target. 7 August 04 Half year results 04 6

7 Report card Farmers Exchanges Positive momentum continues NET PROMOTER SCORE RETENTION % 74.9% 74.8% 74.7% 75.3% HY-3 9m-3 FY-3 Q-4 Q-3 Q3-3 Q4-3 Q-4 NET GAIN / LOSS OF AGENTS 4 NEW BUSINESS COUNT GROWTH % % -9.% -6.% -.9% Q-3 Q3-3 Q4-3 Q-4 Q-3 Q3-3 Q4-3 Q-4 Provided for informational purposes only. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides administrative and management services to the Farmers Exchanges as its attorney- in-fact and receives fees for its services. Survey based measure of customer loyalty (for Farmers Auto and Farmers Home only). 03 figures shown are calculated on YTD basis. 3 Reflects rolling 3-month 3/ survival rate for Farmers Exchanges, based on trailing -month weighted average GWP. 4 Change in total number of exclusive Farmers agents including full time and career agents. 5 Quarterly YoY change in new business counts for all books of business. Farmers and Bristol West Auto reflects New Business/New Household. 7 August 04 Half year results 04 7

8 Key messages General Insurance Improving accident year combined ratio, good progress with turnaround/exit businesses Global Life In-force management initiatives under way, priority market growth strategy progressing Farmers Positive trends continue Cash remittance Cash remittances expected for full year >USD 3.5bn 7 August 04 Half year results 04 8

9 Financial highlights George Quinn, Chief Financial Officer

10 Group Business operating profit Solid start to the year BOP BY SEGMENT (USDm) RECONCILIATION (USDm) +5% +3%,5,636,88,369,6,65, , HY- HY-3 HY Q Q ,40 BOP RCG 3.% tax rate Accounting SH and restr Taxes charges Other 837 NIAS General Insurance Global Life Farmers OOB NCB Non-controlling interests Realized capital gains/losses, incl. a net loss on divestments of businesses of USD 3m. Shareholder taxes (income tax expense attributable to shareholders). 7 August 04 Half year results 04 0

11 General Insurance Topline Catch-up in topline with some rate pressure on US property GWP GROWTH IN LC (%) RATE CHANGE (%) Q-3 Q-4 GC 3% % 4% 5% 3% % NAC -% 5% 3% 5% 4% % EMEA -4% -% % 3% % % IM -5% % 7% 3% 4% 3% Total 3% 6% 5% 4% 3% % Q-3 Q- GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. Total incl. GI Global Functions, Group Reinsurance and Eliminations. 7 August 04 Half year results 04

12 General Insurance Combined ratio Further improvement in AY combined ratio excl. catastrophes COMBINED RATIO SPLIT (%) COMBINED RATIO BY REGION (%) 97.4% 3.0%.4% 99.% 5.8%.9% 95.7%.6%.3% GC NAC 97.7% 95.9% 95.7% 98.5% 95.5% 94.6% 90.9% EMEA 93.8% 0.3% IM 99.9% 99.5% -3.3% -4.% 0.0% Total 95.7% 99.% Q- Q-3 80% 85% 90% 95% 00% 05% Catastrophes Shift non-technical result 3 AY CR (excl. catastrophes) PYD Q-3 Catastrophes includes major and mid-sized catastrophes including significant weather related events. Accident year combined ratio excludes prior year reserve development. 3 0 impact is an estimation. 7 August 04 Half year results 04

13 General Insurance BOP components Good profitability driven by improved underwriting result BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) % Q- -3 Q Q-3 UWR Investment Income RCG NTR NCI Underwriting result Investment inc. / Realized capital gains (RCG) Non-technical result (NTR) Non-controlling interest (NCI) Impact for the shift of parts of the non-technical result is an estimation. 7 August 04 Half year results 04 3

14 Global Life New business Continued growth in APE and Assets under Management APE (USDm) NBM & NBV NET INFLOWS & AUM NBM (%) Net inflows (USDbn) +% , , NBV (USDm) -% % AuM (USDbn) Q- Q-3 Q- Q-3 Q- Q-3 3rd party investments Other APME North America Latin America Europe Group investments Unit-linked Note: APE is reported before minority interests. NBM and NBV are reported net of minority interests, with prior year figures restated accordingly. 7 August 04 Half year results 04 4

15 Global Life BOP by region One-offs lead to a reduction in discrete quarter profit BOP BY REGION (USDm) KEY DRIVERS (USDm) % Q- Q-3 Q-3 Europe Latin America North America APME Other Other APME North America Latin America Europe 7 August 04 Half year results 04 5

16 Global Life Source of Earnings Growth in revenues and in new business investment BOP BY SOURCE OF EARNINGS (USDm) REGIONAL BOP & KPIs (USDm) HY-3 Loadings & fees, % 5% -55% -% 5% nm 45 Inv. margin Technical margin 567 8% -7% Operating costs % EU US APME LatAM Other Acquisition costs -,57 % Revenues Expenses Deferral impacts 63 HY-4 BOP 634-6% -4% KPIs HY-3 HY-4 As a % of UL fund based fees 0.7% 0.70% Average UL AuM Other loadings 3% % GWP & Deposits Investment margin 0.86% 0.84% Average NL reserves Germany discretionary dividends Premium & other fees UL fund based fees Acquisition costs 85% 75% APE Operating costs 0.86% 0.8% Average reserves Adjusted for German discretionary dividends. 7 August 04 Half year results 04 6

17 Farmers Exchanges KPIs Positive signals in top-line performance continue GWP GROWTH (%) COMBINED RATIO (%) 3 SURPLUS (USDbn) 4-0.9% -0.9% 6.3% 6.4%.7% 6.% 08.3%.9% 33.3% 36.6% 36.7% -.6% -.% 99.9% 95.5% 95.3% % Q-3 Q3-3 Q4-3 Q-4 Q- Q-3 FY- FY-3 HY-4 Catastrophe losses CR (excl. catastrophe losses) Surplus ratio 4 Farmers Exchanges surplus Farmers Re surplus Provided for informational purposes only. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides administrative and management services to the Farmers Exchanges as its attorney- in-fact and receives fees for its services. Adjusted for the impact of the Texas Department of Insurance litigation. 3 Before quota share treaties with Famers Reinsurance Company, Zurich Insurance Company Ltd and a third party reinsurer. 4 Surplus ratio excludes surplus of Farmers Reinsurance Company. 7 August 04 Half year results 04 7

18 Farmers KPIs Expense savings compensate for lower management fees at FMS BOP (USDm) MGEP MARGIN (%) FARMERS RE CR (%) % 7.% 7.4% 4.8% 5.6% 0.4% 5.0% 05.5%.4% % 95.4% 93.% Q- Q-3 Q- Q-3 Q- Q-3 FMS FRe Catastrophes3 CR (excl. catastrophes) Margin on gross earned premiums of the Farmers Exchanges. Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc. (or Farmers Management Services (FMS)), a wholly owned subsidiary of the Group, provides administrative and management services to the Farmers Exchanges as its attorney- in-fact and receives fees for its services. Farmers Re (FRe) business includes all reinsurance assumed from the Farmers Exchanges by the Group (i.e. Farmers Reinsurance Company and Zurich Insurance Company Ltd). 3 As defined by the All Lines quota share reinsurance treaty. 7 August 04 Half year results 04 8

19 Group Balance sheet and capital Very strong capital position SHAREHOLDERS EQUITY (USDm) CAPITAL MODEL RATIO (%) 34,670 -, ,699 % 4% 7% 8% 06% 85% 7% 78% 58% 6% 70% Q-4 Dividend NIAS Net URG/L CTA (excl. dividend) Pension plans & Other HY-4 Z-ECM SST 3 Solvency I FY- HY-3 FY-3 Q-4 Dividend as approved by the Annual General Meeting on April, 04 and at transaction day exchange rates. Dividend at historical exchange rates amounts to USD,85m, with the difference of USD,0m reflected in the cumulative foreign CTA. Net actuarial gains/losses on pension plans. 3 The Swiss Solvency Test (SST) ratio is calculated based on the Group s internal model, and both are subject to the review and approval of the Group s regulator, the Swiss Financial Market Supervisory Authority (FINMA). The ratio is filed with FINMA bi-annually. 7 August 04 Half year results 04 9

20 Group Free capital generation Strong free capital generation and cash remittances 03 FREE CAP GENERATION (USDbn) NET CASH REMITTANCES (USDbn) > IFRS NIAS Accounting differences Local statutory operatings earnings Volume related changes in required capital Free Capital Generation 03 Free Capital Generation Change in timing differences & other capital movements Gain on NCI 03 Net cash remittances FC 04 3 Non-Operating items General Insurance Global Life Farmers NCB OOB Relates to changes in timing differences and internal financing, regulatory restrictions and other movements in solvency capital. Gain on the sale of the investment in New China Life. 3 Estimated full year 04 cash remittances, subject to change. 7 August 04 Half year results 04 0

21 Key messages General Insurance Improving accident year combined ratio, good progress with turnaround/exit businesses Global Life In-force management initiatives under way, priority market growth strategy progressing Farmers Positive trends continue Cash remittance Cash remittances expected for full year >USD 3.5bn 7 August 04 Half year results 04

22 Disclaimer and cautionary statement Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the Group ). Forward-looking statements include statements regarding the Group s targeted profit, return on equity targets, expenses, pricing conditions, dividend policy and underwriting and claims results, as well as statements regarding the Group s understanding of general economic, financial and insurance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and plans and objectives of Zurich Insurance Group Ltd or the Group to differ materially from those expressed or implied in the forward looking statements (or from past results). Factors such as (i) general economic conditions and competitive factors, particularly in key markets; (ii) the risk of a global economic downturn, in the financial services industries in particular; (iii) performance of financial markets; (iv) levels of interest rates and currency exchange rates; (v) frequency, severity and development of insured claims events; (vi) mortality and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes in laws and regulations and in the policies of regulators may have a direct bearing on the results of operations of Zurich Insurance Group Ltd and its Group and on whether the targets will be achieved. Zurich Insurance Group Ltd undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise. All references to Farmers Exchanges mean Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and their subsidiaries and affiliates. The three Exchanges are California domiciled interinsurance exchanges owned by their policyholders with governance oversight by their Boards of Governors. Farmers Group, Inc. and its subsidiaries are appointed as the attorneys-in-fact for the Farmers Exchanges and in that capacity provide certain non-claims administrative and management services to the Farmers Exchanges. Neither Farmers Group, Inc., nor its parent companies, Zurich Insurance Company Ltd and Zurich Insurance Group Ltd, have any ownership interest in the Farmers Exchanges. Financial information about the Farmers Exchanges is proprietary to the Farmers Exchanges, but is provided to support an understanding of the performance of Farmers Group, Inc. and Farmers Reinsurance Company. It should be noted that past performance is not a guide to future performance and that interim results are not necessarily indicative of full year results. Persons requiring advice should consult an independent adviser. This communication does not constitute an offer or an invitation for the sale or purchase of securities in any jurisdiction. THIS COMMUNICATION DOES NOT CONTAIN AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES; SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION, AND ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE BY MEANS OF A PROSPECTUS THAT MAY BE OBTAINED FROM THE ISSUER AND THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE COMPANY AND MANAGEMENT, AS WELL AS FINANCIAL STATEMENTS 7 August 04 Half year results 04

23 Appendix

24 GI Combined ratio details AY loss ratio further improved LOSS RATIO (%) EXPENSE RATIO (%) 70.3% 4.4% 68.3% 3.% 66.%.% 67.6% 3.0% 69.4% 5.8% 65.9%.3% 30.4% 3.6% 9.7% 3.5% 30.0% 3.5% 9.9% 3.4% 9.7% 3.4% 9.7% 3.% 68.0% 67.5% 64.6% 68.0% 67.8% 63.6% 4.5% 3.7% 3.9% 4.% 3.5% 4.0% -.0% -.4% -0.6% -3.4% -4.% 0.0%.3%.5%.6%.4%.9%.6% FY- FY-3 HY-4 Q- Q-3 FY- FY-3 HY-4 Q- Q-3 Catastrophes AY LR (excl. catastrophes) PYD Commissions Other technical expenses Shift non-technical result Catastrophes includes major and mid-sized catastrophes including significant weather related events. 0 impact is an estimation. 7 August 04 Half year results 04 4

25 GI Shift of non-technical result Most of original non-technical result has been shifted to the CR SHIFTED AND REMAINING ACCOUNTS IMPACT ON COMBINED RATIO (%) Accounts shifted to technical expenses: Central charges Amortization of intangible assets Amortization of distribution agreements Accounts remaining in non-technical result: Interest expenses on debt Transactional FX gains/losses Other non-operational costs (incl. oneoffs) 45 GI GC NAC.%.5%.5%.9%.9%.3%.7%.9%.0%.3%.7%.%.6% 3.%.0%.6%.0%.% Interest FX Other EMEA IM.3%.6% 3.5% 3.%.6% 4.6%.7% 3.3%.6%.8%.9%.8% Q-3 Q-3 Q3-3 Q4-3 Q-4 Q-3 Q-3 Q3-3 Q4-3 Q-4 7 August 04 Half year results 04 5

26 GI Loss ratio details AY loss ratio further improved LOSS RATIO (%) 67.5%.% 75.5% 69.4% 67.6% 70.3% 9.7% 67.4% 68.6% 3.0% 67.7%.% 5.8% 66.3% 3.7%.6%.6%.9% 65.9%.3% 67.% 67.9% 68.% 68.5% 66.4% 67.8% 66.7% 69.0% 65.6% 63.6% -.9% -3.3% 0.0% -.7% -0.3% -4.% -3.% -.0% -.% 0.0% Q- Q- Q3- Q4- Q-3 Q-3 Q3-3 Q4-3 Q-4 Catastrophes AY LR (excl. catastrophes) PYD Catastrophes includes major and mid-sized catastrophes including significant weather related events. 7 August 04 Half year results 04 6

27 GI Global Corporate KPIs CR impacted by adverse PYD on large losses HY-4 KEY FINANCIALS USD 479m USD 40m GWP Growth Zurich rate change Combined Ratio 9.% 95.8% 4%.4% 96% 0.7%.9% KEY DRIVERS BOP 7.5% 74.0% HY-3 HY-4 Expense ratio Loss ratio Growth driven by rate change and strong Q new business in US as a result of execution on growth initiatives, partly off-set by selected re-underwriting actions in Europe and APAC Solid positive rate change achieved through consistent portfolio tiering Strong AY combined ratio, with deterioration of calendar year combined ratio due to adverse PYD on a few large losses In local currency. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 7 August 04 Half year results 04 7

28 GI North America Commercial KPIs Good underlying growth with improved combined ratio HY-4 KEY FINANCIALS USD 365m USD 469m GWP Growth Zurich rate change Combined Ratio 99.6% 96.3% 3% 3% 96% 9.5% 30.8% KEY DRIVERS 70.% 65.5% HY-3 HY-4 BOP Expense ratio Loss ratio Underlying growth at +3% following positive effects from rate tiering strategies and execution on strategic growth initiatives Market pressure on rates especially in property lines Combined ratio benefitted from benign weather and an underlying improvement of the business In local currency, and excluding a large discontinued fronting contract. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 7 August 04 Half year results 04 8

29 GI EMEA KPIs Broadly flat top-line with further progress in underlying CR HY-4 KEY FINANCIALS USD 407m USD 679m GWP Growth Zurich rate change Combined Ratio 99.0% 94.7% 0% % 95% 9.8% 30.% KEY DRIVERS 69.% 64.6% HY-3 HY-4 BOP Expense ratio Loss ratio We are seeing growth in UK and Spain, and in Switzerland and Germany personal lines, off-set by market challenges in Italy Solid combined ratio benefitting from benign weather but with underlying improvement, even excluding the one time pension gain Germany back on track and recognition of successful underwriting in UK, Switzerland and Italy In local currency. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 7 August 04 Half year results 04 9

30 GI International Markets KPIs Reduced growth partly driven by focus on profitability HY-4 KEY FINANCIALS USD m USD 97m GWP Growth Zurich rate change Combined Ratio 0.5% 99.9% 5% 3% 00% 4.9% 40.7% 59.6% 59.% HY-3 HY-4 BOP Expense ratio Loss ratio KEY DRIVERS Underlying growth at 5% Higher rate increases due to increased focus on profitability in Latin America, partly offset by commercial rates softening in some Asian markets Combined ratio benefitted from lower catastrophes and solid improvement of expense ratio In local currency, and adjusting for the carve out of certain Global Corporate business. GWP development due to premium rate change as a percentage of the renewed portfolio against the comparable prior year period. 7 August 04 Half year results 04 30

31 GI Rate change monitor Continued rate increases, with market pressure in US property ZURICH RATE CHANGE ASSESSMENT Business Group Global Corporate North America Commercial EMEA UK Germany Switzerland Italy Spain International Markets Assessment Rates increases are generally at adequate levels but we see some market pressure, mainly in US property lines Modest rate increases in all regions apart from Asia Pacific; casualty lines positive, flat overall renewal pricing on property lines mainly due to market pressure in the US Continued rate increases across all lines of business apart from property where market pressure is growing; positive rate increases in special lines and motor Fairly stable rate increases, inline with our expectations, but with different local market dynamics Solid rate increases in our main lines of business but some, particularly motor, below prior year increases; overall rates are in line with expectations Good rate increases in motor, ahead of expectations Renewal rates broadly flat, consistent with prior quarters Overall like for like renewal pricing broadly flat; pressure on motor rates due to high market profitability Slightly lower rate increases, mainly in motor Mid-single digit rate increases, with increases in Latin America and Asian retail lines partly offset by commercial rates softening in some Asian markets 7 August 04 Half year results 04 3

32 GI Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES (USDm) Single global USD 50m treaty, which can be applied to any region Single global USD 500m treaty, which can be applied to any region Europe all perils US windstorms NA earthquakes Rest of World all perils Combined global cat treaty Global cat treaty Regional cat treaties Retention % of co-participation GLOBAL AGGREGATE CAT TREATY 950 Variable retention Reinsurance indemnification in excess of variable retention, ,400,550 All cat losses exceeding USD 35m Variable retention Global aggregate cat treaty Combined global cat treaty % of co-participation US Cat Treaty and Global Aggregate Cat Treaty renewed on January, 04; Europe Cat Treaty and Global Cat Treaty renewed on April, 04; and International Cat Treaty renewed on July, 04. This USD 50 million cover is the same combined global occurrence / aggregate treaty presiding over the global catastrophe treaty. This cover can be used only once, either for aggregated losses or for an individual event. 7 August 04 Half year results 04 3

33 GL North America Key financials High new business strain and one-off items in the technical margin impacting BOP BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) Loadings & fees HY-3 3% Inv. margin 0-4% Technical margin 7-5% Operating costs -79-0% FY- FY-3 HY-4 Acquisition costs -00-9% NBV BOP Cash Remittance Deferral impacts 0 HY-4 BOP 37 78% -55% KPIs HY-3 HY-4 As a % of UL fund based fees 0.7% 0.6% Average UL AuM Other loadings 9% 3% GWP & Deposits Investment margin 0.99% 0.74% Average NL reserves Premium & other fees UL fund based fees Acquisition costs 90% 9% APE Operating costs.07%.45% Average reserves Cash remittance received centrally. 7 August 04 Half year results 04 33

34 GL Europe Key financials BOP broadly flat excluding one-off impacts BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) Loadings & fees ,35 HY-3 % Inv. margin % Technical margin 87 -% 6 5 Operating costs % FY- FY-3 HY-4 Acquisition costs -69 3% NBV BOP Cash Remittance Deferral impacts 4 90% KPIs HY-3 HY-4 As a % of UL fund based fees 0.66% 0.65% Average UL AuM HY-4 BOP 45 5% Other loadings 0% 9% GWP & Deposits Investment margin 0.7% 0.67% Average NL reserves Germany discretionary dividends UL fund based fees Acquisition costs 70% 53% APE Premium & other fees Operating costs 0.58% 0.50% Average reserves Cash remittance received centrally. Adjusted for German discretionary dividends. 7 August 04 Half year results 04 34

35 GL APME Key financials Good growth in fee and technical margins BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) Loadings & fees HY-3 5% Inv. margin 30 -% Technical margin 68 6% Operating costs -34-3% Acquisition costs -7 % FY- NBV FY-3 BOP Cash Remittance HY-4 Deferral impacts 59 HY-4 BOP 56-48% -% KPIs HY-3 HY-4 As a % of UL fund based fees.36%.34% Average UL AuM Other loadings 3% 4% GWP & Deposits Investment margin.06%.0% Average NL reserves Premium & other fees UL fund based fees Acquisition costs 90% 90% APE Operating costs.84%.79% Average reserves Cash remittance received centrally. 7 August 04 Half year results 04 35

36 GL Latin America Key financials Strong growth in revenues in local currency BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) Loadings & fees HY-3 % Inv. margin 70 4% Technical margin 45 % 86 Operating costs -8 0% FY- FY-3 HY-4 Acquisition costs -35 % NBV BOP Cash Remittance Deferral impacts -0 HY-4 BOP 8-5% 5% KPIs HY-3 HY-4 As a % of UL fund based fees 0.59% 0.55% Average UL AuM Other loadings 3% 5% GWP & Deposits Investment margin.48% 3.38% Average NL reserves Premium & other fees UL fund based fees Acquisition costs 0% 88% APE Operating costs.66%.58% Average reserves Cash remittance received centrally. 7 August 04 Half year results 04 36

37 GL New business by pillar Strong second quarter production DISCRETE KEY FINANCIALS APE (USDm),7, NBM 3.5% PVNBP USD bn CLP single premium USD.3bn Q- Q-3 NBV (USDm) Q- Q-3 Corporate Life & Pensions Other retail Bank distribution KEY DRIVERS Growing CLP APE due to increases in corporate savings contracts Strong Bank APE in Latin America and Spain The higher volumes of lower margin business and assumption updates reduced the NBM Note: 0 figures do not include Zurich Santander. APE is reported before minority interests. NBM and NBV are reported net of minority interests, with prior year figures restated accordingly. 7 August 04 Half year results 04 37

38 GL Net inflows & assets under management Positive net inflows and asset development NET INFLOWS BY REGION (USDbn) AUM DEVELOPMENT (USDbn) Q- -. Q-3 Q-4 Net inflows Market movements and other FX HY-4 Other APME Latin America North America Europe 3rd party investments Group investments Unit-linked 7 August 04 Half year results 04 38

39 GL MCEV free surplus roll-forward Positive development of free surplus transferred to Group FREE SURPLUS DEVELOPMENT (USDm) ,790,793 Opening free surplus FY-3 Cash strain from new business net of NCI Expected transfer to free surplus Expected contribution from in-force Operating variances Model variances within operating variances Economic & nonoperating variances Dividends & capital movements FX Closing free surplus HY-4 The Free Surplus is the market value of any asset allocated to, but not required to support, the in-force business at the valuation date. Free Surplus is calculated as Shareholders' net assets less the Required Capital. The Required Capital is the sum of the minimum amount of solvency capital required to satisfy the local regulator and the additional capital that the Management of the Company considers appropriate to hold in addition to minimum solvency capital. Some of the assets making up the free surplus are not available for distribution. Examples of constraints are group internal loans needed for liquidity, intangible assets allowed under local regulation to cover solvency requirements, cash retained to support future new business, consolidation requirements, group internal reinsurance. 7 August 04 Half year results 04 39

40 Zurich Santander Quarterly results Continued growth offset in USD by adverse FX development PROFIT BEFORE TAX GI & LIFE (00%) INTANGIBLES AMORTIZATION (00%) CORE SEGMENT BOP GI & LIFE (5%) Q4- Q-3 Q Distribution agreement PVFP MINORITY ADJUSTMENT (-49%) Q4- Q-3 Q Q4- Q- Q4-3 EARN-OUT & PPA ADJUSTMENTS (5%) Q4- Q-3 Q Statutory profit before tax BOP before interest, depreciation and amortization -3 Q4- Q Q GI Life 7 August 04 Half year results 04 40

41 Farmers Exchanges GWP Positive signals in top-line performance continue DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) -.5% -0.9% 9,477 9,335 4,804 4,760 4,39 4,03-4.%,4,06-3.7%,338, %,8, % ,087, % +0.3% +6.9% -3.8% % +7.3% +6.4% -36.3% HY-3 HY-4 Q-3 Auto Home EA Business Insurance Bristol West Specialty Other Bristol West writes non-standard Auto business. Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. Note that Personal Umbrella has been moved to Auto as per HY-4. 7 August 04 Half year results 04 4

42 Farmers Exchanges PIF/VIF Further underlying improvement, decline driven by Direct Auto DEVELOPMENT OF PIF/VIF BY BUSINESS LINE (THOUSANDS) -.0% -0.3% 9,98 9,4 9,64 9,4 9,96 9, % 9,836 9, % 4,875 4,80 -.% 4,843 4,80-0.5% 886, , % +6.6% +.4% -5.4% 43 95, , % +3.% +0.9% -8.4% December 03 June 04 March 04 June 04 Auto Home EA Business Insurance Bristol West Specialty Other 3 Policies-in-force (PIF) or Vehicle-in-force (VIF) for Auto businesses. Bristol West writes non-standard Auto business. 3 Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. Note that Personal Umbrella has been moved to Auto as per HY-4. 7 August 04 Half year results 04 4

43 Farmers Exchanges Combined ratio Combined ratio reflects high catastrophe losses in COMBINED RATIO BY BUSINESS LINE (%) Auto 00.9% 99.6% Auto 04.% 0.% Home 06.%.% Home 08.5% 33.6% EA Business Insurance 0.8%.% EA Business Insurance 04.9% 6.6% Bristol West 0.0% 00.7% Bristol West 00.3% 98.8% Specialty 98.7% 98.4% Specialty 07.4% 05.6% Other 3.%.7% Other 3 9.%.% Total 0.4% 04.0% Total 08.3%.7% HY-4 HY-3 Q-3 Combined ratio is before quota share treaties with Famers Reinsurance Company, Zurich Insurance Company Ltd and a third party reinsurer. Bristol West writes non-standard Auto business. 3 Other includes Miscellaneous Pools, Independent Agent personal lines business, Independent Agent Business Insurance and Discontinued Operations. Note that Personal Umbrella has been moved to Auto as per HY-4. 7 August 04 Half year results 04 43

44 Farmers Exchanges Combined ratio history Catastrophe losses drive volatility in quarterly combined ratio QUARTERLY COMBINED RATIO (%) Catastrophes impact Incl. Rita & Katrina Incl. California wildfires Incl. Ike & Gustav Incl. 7 Catastrophe Events Incl. Irene Incl. 3 Catastrophe Events Incl. 3 Catastrophe Events Excl. Fogel/SoT settlements Incl. 3 Catastrophe Events 80 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Q3 Q4 Q Q Farmers Exchanges adopted industry standard ISO defined catastrophes as per July 0. 7 August 04 Half year results 04 44

45 Group Investments Asset allocation Zurich s sources of investment risk and return are balanced ASSET ALLOCATION (%) RISK DIVERSIFICATION RISK DRIVERS (%),3 Total Group Investments: USD 5bn 4% 5% 5% % 4% 00% 8% 3% % 35% 40% 4% 6% 80% 7% Fixed income Mortgages Real estate Equities HF, PE 4 Cash Sum of single security risks Investment risks diversified Investment risk relative to liabilities Equity risk Interest rate risk Credit spread risk RE risk FX risk Specific risk Economic view. Estimated. 3 Risk drivers of ALM/Market risk (at Expected Shortfall 99% based on Monte Carlo simulation) show marginal contribution to the total ALM/Market risk. 4 Hedge funds, Private equity. 7 August 04 Half year results 04 45

46 Group Investments Debt securities portfolio The debt securities portfolio is of a high quality BY CATEGORY (%) BY RATING (%) Total debt securities: USD 6bn % 3% % % 48% 40% 7% 37% Government and government related bonds Corporate bonds MBS/ABS AAA AA A BBB Non-investment grade 7 August 04 Half year results 04 46

47 Investment income yield Decline in investment yields slowed down GENERAL INSURANCE (%) GLOBAL LIFE (%) GROUP (%) Equity.03%.33%.7% Equity.7%.9%.57% Equity.9%.39%.34% Debt.30%.34%.65% Debt.73%.8%.0% Debt.5%.57%.79% Real estate.63%.8%.89% Real estate.77%.85% 3.03% Real estate.86%.89% 3.06% Mortgage loans.7%.9%.8% Mortgage loans.88%.95%.97% Mortgage loans.8%.9%.05% Total (gross).30%.34%.6% Total (gross).77%.86%.99% Total (gross).59%.6%.80% Total (net).%.8%.55% Total (net).70%.79%.9% Total (net).5%.55%.74% HY-4 HY-3 HY- Calculated based on the asset class average assets, not annualized, accounting view before eliminations. Net of investment expenses. 7 August 04 Half year results 04 47

48 Group Economic capital models Very strong capital position Z-ECM RATIO DEVELOPMENT (%) SST RATIO DEVELOPMENT (%) 4% 3% -% -4% 06% % 3% -6% 3% 7% 7% 8% FY-3 Business profits Market movements Dividend accrual Model changes & Other Q-4 HY-3 Business profits Market movements Dividend accrual Model changes & Other FY-3 Note: Other includes impact of implementation of incremental market risk taking Note: SST ratio is filed bi-annually with FINMA and July data not yet available The Swiss Solvency Test (SST) ratio is calculated based on the Group s internal model, and both are subject to the review and approval of the Group s regulator, the Swiss Financial Market Supervisory Authority (FINMA). The ratio is filed with FINMA bi-annually. 7 August 04 Half year results 04 48

49 Group Z-ECM components Well diversified capital base by risk type Q-4 AFR COMPOSITION (USDbn) RBC BY RISK TYPE AND BUSINESS (%) Shareholders equity Dividend accrual Net intangibles VIF & RBC adjustments % 6% % 4% % 35% 8% 3% ALM / Market risk Operational risk Business risk P&R risk Re-ins credit risk Life insurance risk Natural cat risk Investment credit risk Financial debt Capital allocation to Farmers Available Financial Resources % 7% 7% 54% General Insurance Global Life Farmers Other Premium & reserving risk. Includes Other Operating Businesses and Non-Core Businesses. 7 August 04 Half year results 04 49

50 For further information CALL US VISIT OR FOLLOW US Investor Relations James Quin André Meier Michael Boardman Gianni Vitale Rating Agency Management Michèle Matlock Events Patricia Heina Download: Zurich Investors and Media App 7 August 04 Half year results 04 50

51 Calendar: - September 30 October, BoAML Annual Banking & Insurance CEO Conference - November 6, Results for nine months to September 30, 04 - December 5, Investor update, London - February, 05, Annual results 04 Zurich Insurance Company Ltd