News Release. Zurich reports a strong operating performance and proposes a significantly increased gross dividend of CHF 16.00

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1 News Release Zurich reports a strong operating performance and proposes a significantly increased gross dividend of CHF Zurich Financial Services Ltd Mythenquai Zurich Switzerland SIX Swiss Exchange/SMI: ZURN Valor: Group Media Relations phone +41 (0) fax +41 (0) media@zurich.com Investor Relations phone +41 (0) fax +41 (0) investor.relations@zurich.com Zurich, February 4, 2010 Zurich Financial Services Group (Zurich) reported today continued strong operating performance, sustained profitability in all its core business segments and targeted growth in profitable market segments, particularly in Global Life and Farmers. For the year 2009, the Group generated an increased business operating profit and net income 1 after tax of USD 5.6 billion and USD 3.2 billion, respectively. Reflecting its confidence in the sustainability of these results, the Zurich Board of Directors will propose to the shareholders a gross dividend of CHF was an excellent year for Zurich. We generated a strong operating performance across all our core businesses and emerged from a challenging year with one of our strongest balance sheets ever, remarked Zurich s Chief Executive Officer Martin Senn. It is that proven ability to generate consistent earnings and achieve growth in targeted market segments that underpins my confidence looking forward, as it enables Zurich to face both challenges and opportunities from a position of strength. Performance highlights 2 include: Business operating profit (BOP) of USD 5.6 billion, an increase of 8%. BOP return on equity 3 after tax of 17.2% Net income of USD 3.2 billion, an increase of 6%. Return on equity of 12.6% General Insurance gross written premiums and policy fees of USD 34.2 billion, down 8% or 4% in local currencies, and a combined ratio of 96.8%, an improvement of 1.3 percentage points Global Life new business value 4, after tax, up 4% to USD 782 million, with new business margin, after tax (as % of APE), of 21.3% and new premiums (APE) up 12% or 19% in local currencies

2 Page 2 Farmers Management Services management fees and other related revenues up 9% to USD 2.7 billion Shareholders equity of USD 29.7 billion, an increase of 34% Diluted earnings per share of CHF 24.21, up 4% During the course of 2009, Zurich generated operating profits as well as a continuously improved net income in each discrete quarter, compensating successfully for the lower yield environment. This includes a business operating profit of USD 1.5 billion and net income after tax attributable to shareholders of USD 1.1 billion in the fourth quarter stand-alone. Demonstrating its continued commitment to operational and financial discipline, the Group met its expense saving target for 2009 of USD 400 million and achieved in its General Insurance segment average rate increases of 3 percentage points during The Zurich Board of Directors will propose to the Annual General Meeting on March 30, 2010 a gross dividend of CHF per share, representing a 66% payout of earnings to shareholders and a 45% increase over last year s CHF gross dividend. Furthermore, the Board will propose the destruction of the remaining 1.8 million shares from the share buyback program The dividend proposal reflects the Board s confidence in Zurich s business strategy and the sustainability of its results, remarked Senn. Furthermore, I am particularly proud of our ability to continue generating such long-term shareholder value, while balancing the need to retain the strong and prudent solvency position our customers expect. In 2009, the Group continued to capitalize on its selective growth efforts by delivering profitable growth in attractive life and general insurance markets. Growth was driven by expanding the product range and distribution capabilities, both organically as well as through the ongoing successful

3 Page 3 integration of recent acquisitions in Europe, the U.S. and emerging markets. Furthermore, efforts to enhance the effectiveness of Zurich s customerfocused brand positioning resulted in an overall improvement of Zurich s brand awareness scores. Zurich also continued to transform its operating platforms to bolster the effectiveness and efficiency of its business. The benefits from these initiatives in 2009 comfortably exceeded the after-tax operational improvement target under The Zurich Way initiatives of USD 900 million after tax, with similar targets for 2010 and Segment performance General Insurance: in USD millions, for the years ended December Change in USD Change in LC General Insurance gross written premiums and policy fees 34,157 37,151 (8%) (4%) General Insurance business operating profit 3,463 3,535 (2%) 1% General Insurance combined ratio (in %) 96.8% 98.1% 1.3 pts General Insurance continued to focus on maintaining strong profit margins through successful rate actions, delivering a robust operating performance against the backdrop of contracting insurance markets. The Group s continued focus on underwriting discipline, portfolio management and differentiated pricing proved successful in maintaining margins, though also negatively impacting volumes in a competitive market environment. Business operating profit was USD 3.5 billion, down 2% in USD but up 1% in local currencies, as an improved underwriting result partially offset lower investment income. The combined ratio improved to 96.8% as a result of careful underwriting practices and lower levels of natural catastrophe losses. Gross written premiums and policy fees decreased 4% in local currencies, mainly driven by lower volumes in North America and difficult market conditions in Western Europe.

4 Page 4 Across the segment s commercial businesses, comprising large corporate customers as well as small and mid-sized commercial firms, a continued focus on differentiated rate actions and underwriting discipline generated strong operating performances, with average rate increases of 4%. Global Corporate achieved a significant improvement in profitability, with the remaining commercial businesses maintaining a solid operating performance. The ability to capitalize on growth opportunities in targeted market segments helped to mitigate the impact of pricing discipline and lower economic activity on volumes, which particularly affected certain market segments in North America. Underwriting results and profitability also benefited from a more favorable loss experience, including lower levels of natural catastrophe losses. The segment s personal lines businesses generally performed well, while operating in a continually competitive environment. Profitability was impacted by industry-wide weak results in the motor business in Italy and the UK, reflecting the challenges posed by the economic and competitive market environment in these two European markets. Decisive underwriting actions across these areas also impacted the ability to grow volumes. Latin America achieved significant growth in local currency terms through both organic growth and as a result of an acquisition in Brazil in Global Life: in USD millions, for the years ended December Change in USD Change in LC Global Life gross written premiums, policy fees and insurance 26,029 21,873 19% 28% deposits Global Life business operating profit 1,477 1,490 (1%) 5% Global Life gross new business annual premium equivalent (APE) 3,667 3,261 12% 19% Global Life new business margin, after tax (as % of APE) 21.3% 23.1% (1.8 pts) Global Life new business value, after tax % 9% The Global Life segment continued to deliver strong results, achieving profitable growth in a difficult market environment and performing well on all key metrics. New business value, after tax, reached USD 782 million, an

5 Page 5 increase of 9% on a local currency basis, growing not only in each successive quarter of 2009 but accelerating over the course of the year, underpinned by efficiency gains and focused efforts to shift the new business mix towards protection business. New business volumes (in terms of annual premium equivalent or APE) increased by 12% or 19% in local currencies, with a continuing strong new business margin of 21.3%. Most of the six pillars, which underlie Global Life s distribution and proposition-oriented strategy, contributed to APE growth: Bank Distribution in Spain, where both the existing business and the 2008 acquisitions performed above targets, Corporate Life & Pensions activities in the UK and Ireland, IFA/Broker with strong sales in the UK and crossborder sales into Italy, as well as the successfully launched Private Banking Client Solutions pillar, producing in Luxemburg and the UK. The Agents pillar experienced growth in almost all countries via customer and distributor-focused programs, though margins were affected by interest rate declines. Reflecting the impact of adverse financial market conditions in the first half of 2009, new business volumes decreased in Hong Kong, leading to overall volume reductions within the International/Expatriate pillar in Asia. Business operating profit of USD 1.5 billion was up 5% on a local currency basis, with the underlying business benefiting from strong expense management and improved risk and investment margins. A strong focus on in-force management drove net policyholder cash inflows of USD 5.4 billion compared with net policyholder outflows of USD 2.2 billion in 2008, contributing to total assets under management 5 of USD 215 billion at the end of 2009 against USD 180 billion a year before. In addition, the segment further advanced the industrialization of its business model, benefiting overall growth through a notable increase in cross-border sales manufactured in new regional hubs, while also improving efficiency with reduced unit costs in Ireland.

6 Page 6 Farmers 6 : in USD millions, for the years ended December Change in USD Change in LC Farmers Management Services (FMS) management fees and other 2,690 2,458 9% 9% related revenues Farmers Re gross written premiums and policy fees 6,615 3,381 96% 96% Farmers business operating profit 1,554 1,356 15% 15% FMS gross management result 1,291 1,142 13% 13% FMS managed gross earned premium margin 7.2% 6.9% 0.3 pts Farmers Management Services (FMS) grew its management fees and other related revenues by 9% to USD 2.7 billion, reflecting an 8% gross earned premium growth at the Farmers Exchanges (Exchanges), which Zurich manages but does not own. Underlying drivers of this growth were the acquisition of 21 st Century in July of 2009 and the transfer of North America Commercial s Small Business Solutions book to the Exchanges in June In combination with a continued strict expense discipline, the gross management result of FMS improved by 13%, contributing to a 10% higher business operating profit of USD 1.3 billion and an improved managed gross earned premium margin of 7.2%. The integration of 21 st Century continues to progress in line with Farmers successful integration track record. Farmers Re, which provides reinsurance to the Exchanges, nearly doubled its premium volume due to an increase of the existing All Lines quota share reinsurance treaty, executed in various steps, from 5% to 35% as of December 31, 2009 in connection with the acquisition of 21 st Century. In combination with a higher investment income as a result of the increased participation in the All Lines quota share reinsurance treaty, Farmers Re s business operating profit rose to USD 228 million, contributing thereby to an increased business operating profit for the Farmers segment of USD 1.6 billion. Other Operating Businesses: The Other Operating Businesses segment, predominantly consisting of the Group s Headquarter and its Holding &

7 Page 7 Finance activities, reported a reduced business operating loss of USD 611 million, with the improvement of USD 161 million primarily arising from gains on repurchases of subordinated debt executed in advantageous market conditions. Non-Core Businesses: The Non-Core Businesses segment, including the Group s run-off insurance businesses and the Group s banking activities (previously reported under Other Operating Businesses), reported a reduced business operating loss of USD 290 million, reversing the trend from the first three quarters of 2009 as the Group benefited from the further recovery in financial markets during the fourth quarter and an increase in commutation gains in a number of run-off businesses. Group investments: in USD millions, for the years ended December Change in USD Change in LC Group investments average invested assets 187, ,558 1% 5% Group investments results, net 6,082 5,805 5% Group investments return (as % of average invested assets) 3.2% 3.1% 0.1 pts Total return on Group investments (as % of average invested assets) 6.3% 1.0% 5.2 pts The Group s total return on Group investments, including investment income, realized losses and impairments as well as changes in unrealized losses reported in shareholders equity, was an excellent 6.3%. The net investment result for Group investments, which includes investment income and realized losses and impairments, contributed USD 6.1 billion, a return of 3.2%, to the Group s net income. Net capital losses of USD 1.4 billion were driven by impairments on both debt and equity securities. Net unrealized gains reported in shareholders equity as of December 31, 2009 amounted to USD 1.4 billion as a result of positive movements of USD 5.7 billion during This improvement largely occurred in the third quarter as credit spreads narrowed, yields on government securities fell and equity markets rose. The strong total investment return continues to reflect the

8 Page 8 Group s commitment to managing assets relative to liabilities on a riskadjusted basis. Capital management Shareholders equity improved by 34% over year end 2008, driven by the Group s operating performance as well as recovering financial markets. This translated into an improvement of the Group Solvency I position to 198%, which underscores the Group s strong balance sheet and capital position. As reflected in the proposed payout to shareholders in the form of a gross dividend of CHF per share and the destruction of the remaining 1.8 million shares from the share buyback program 2008, the Group s dividend policy targets to strike a reasonable balance between a prudent capital management strategy that reflects caution over the economic environment and preserving competitive dividend levels. The Group remains confident that it is well positioned to continue its shareholder-oriented capital management strategy and take advantage of opportunities both currently and once a more stable economic environment returns. 1 Attributable to shareholders. 2 All comparisons refer to the full year 2008 unless stated otherwise. 3 Return on equity calculated on common shareholders equity. See the Financial Supplement and the Financial Review on the Investor Relations page of our Web site for further information on shareholders and common shareholders equity. 4 Calculated on the Market Consistent Embedded Value basis. 5 Assets under management comprise Group and unit-linked investments that are included in the Global Life balance sheet plus assets that are managed by third parties for which Zurich earns fees. 6 The Farmers reporting segment newly includes Farmers Re.

9 Page 9 Note to Editors: There will be an analyst and media conference at 10:30 a.m. CET at the Zurich Development Center, Keltenstrasse 48, Zurich. Analysts and reporters who cannot participate in person may dial in by telephone. Please note that during the Q&A session no questions will be taken from reporters dialing in. Dial-in numbers: Continental Europe +41 (0) UK +44 (0) USA +1 (1) The presentation to analysts and media will be video webcast on our Web site live, followed by a webcast playback available after 3 p.m. CET. The presentation for analysts and media as well as supplemental information including information on the business divisions and the discrete fourth quarter results are available on our Web site Please click on the Annual Results Media View link on the bottom left corner of our homepage. For broadcast-standard and streaming-quality video including sound bites from CEO Martin Senn, please visit Furthermore, from about 3:00 p.m. CET high resolution pictures of the conference will be available on this portal. If you are a first-time user, please take a moment to register. In case you have any questions, please journalisthelp@thenewsmarket.com. Zurich Financial Services Group (Zurich) is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia-Pacific, Latin America and other markets. Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs approximately 60,000 people serving customers in more than 170 countries.

10 Page 10 Financial Highlights (unaudited) The information contained within this document is unaudited. This document should be read in conjunction with the Financial Report 2009 for the Zurich Financial Services Group. Comparatives are for the years ended December 31, 2008 unless otherwise stated. All amounts, unless otherwise specified, are shown in U.S. dollars and rounded to the nearest million with the consequence that the rounded amounts may not add to the rounded total in all cases. All ratios and variances are calculated using the underlying amount rather than the rounded amount. Certain comparatives including segment disclosures have been restated for changes in presentation and for reclassifications as set out in notes 1 and 30 of the audited consolidated financial statements to conform to the 2009 presentation. The reclassifications have no impact on previously reported business operating profit, net income or shareholders equity. in USD millions, for the years ended December 31, unless otherwise stated Change in USD 1 Change in LC 1 Business operating profit 5,593 5,186 8% 10% Net income attributable to shareholders 3,215 3,039 6% General Insurance gross written premiums and policy fees 34,157 37,151 (8%) (4%) Global Life gross written premiums, policy fees and insurance deposits 26,029 21,873 19% 28% Farmers Management Services management fees and other related revenues 2,690 2,458 9% 9% Farmers Re gross written premiums and policy fees 6,615 3,381 96% 96% General Insurance business operating profit 3,463 3,535 (2%) 1% General Insurance combined ratio 96.8% 98.1% 1.3 pts Global Life business operating profit 1,477 1,490 (1%) 5% Global Life new business annual premium equivalent (APE) 3,667 3,261 12% 19% Global Life new business margin, after tax (as % of APE) 21.3% 23.1% (1.8 pts) Global Life new business value, after tax % 9% Farmers business operating profit 1,554 1,356 15% 15% Farmers Management Services gross management result 1,291 1,142 13% 13% Farmers Management Services managed gross earned premium margin 7.2% 6.9% 0.3 pts Group investments average invested assets 2 187, ,558 1% Group investments result, net 6,082 5,805 5% Group investments return (as % of average invested assets) 3.2% 3.1% 0.1pts Total return on Group investments (as % of average invested assets) 6.3% 1.0% 5.2 pts Shareholders equity 29,678 22,103 34% Solvency I ratio 198% 160% 38 pts Diluted earnings per share (in CHF) % Book value per share (in CHF) % Return on common shareholders equity (ROE) 12.6% 12.1% 0.5 pts Business Operating Profit (after tax) return on common shareholders equity (BOPAT ROE) 17.2% 16.8% 0.4 pts 1 Parentheses around numbers represent an adverse variance. 2 Excluding average cash received as collateral for securities lending of USD 335 million and USD 1.0 billion in the years ended December 31, 2009 and 2008, respectively.

11 Page 11 Disclaimer & 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. 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.