Zurich Insurance Group Ltd · SIX:ZURN

Zurich Insurance — FY2015 Earnings Presentation

39 slides from Zurich Insurance's earnings presentation, Aug 11, 2016

  1. Slide 1: Non-Life Reserve Disclosure 2015

    Non-Life Reserve Disclosure 2015 August 11, 2016 Zurich Insurance Group

  2. Slide 2: Key messages

    Key messages The Zurich Established over a decade ago and proven track record Way Technical Finely segmented data, full range of methods and business insight excellence Using the This published data can be used for high level assessment data Reserve We are confident in our approach and the adequacy

  3. Slide 3: Non-Life Reserve Disclosure 2015 - This document

    Non-Life Reserve Disclosure 2015 THIS DOCUMENT  Overview of the disclosure  The Zurich Way of Reserving  Using the data  Supplementary information – Non-Core Business – Using Schedule P © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 3

  4. Slide 4: Overview of the disclosure: premium and claims data by line of business for major regions

    Overview of the disclosure: premium and claims data by line of business for major regions DATA PROVIDED • Gross data for Accident Years 2006 to 2015: FY-15 net earned premium (USDbn)  Paid Loss  Case Incurred Loss Europe1 10.2  Ultimate Loss  IBNR Reserves  Earned Premium • Lines of business: G

  5. Slide 5: The Zurich Way of Reserving

    The Zurich Way of Reserving HIGHLIGHTS  Established over a decade ago  Global consistency – One group-wide policy with well defined standards – Accredited actuaries in all regions  Technical excellence – Finely segmented data – Full range of actuarial methods and techniques – Quarterly analysis a

  6. Slide 6: The Zurich Way of Reserving

    The Zurich Way of Reserving HIGHLIGHTS  Conservative initial reserves – Favorable development recognized over time – Reacts quickly to adverse trends  Risk-based approach to Reserve Strength – Overall reserve strength modeled statistically – Specific risks and trends quantified and monitored  Str

  7. Slide 7: The Zurich Way of Reserving has a proven track record

    The Zurich Way of Reserving has a proven track record NET PRIOR YEAR DEVELOPMENT (% NEP) The Zurich Way of Reserving 5% 4% 3% 2% 1% 0.5% 0% -0.2% -1% -0.7% -2% -1.4% -1.7% -2.2% -3% 1-2% of NEP -3.0% -4% -3.8% -3.7% -4.1% -4.1% -5% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 USD 7.7bn

  8. Slide 8: We finely segment the data, use a full range of methods and reflect business insight

    We finely segment the data, use a full range of methods and reflect business insight THE ZURICH WAY OF RESERVING  Data: paid amounts, case incurred amounts, claim counts, earned premium, etc.  Segmentation dimensions:  Customer segment: Personal, SME, Commercial, Global Data  Line of business 

  9. Slide 9: We use the full range of actuarial methods

    We use the full range of actuarial methods THE ZURICH WAY OF RESERVING  Data: paid amounts, case incurred amounts, claim counts, earned premium, etc.  Segmentation dimensions:  Customer segment: Personal, SME, Commercial, Global Data  Line of business  Distribution channel  Time cohort (largel

  10. Slide 10: Business insight flows between Underwriting, Claims, Actuarial Pricing and Reserving

    Business insight flows between Underwriting, Claims, Actuarial Pricing and Reserving THE ZURICH WAY OF RESERVING  Data: paid amounts, case incurred amounts, claim counts, earned premium, etc.  Segmentation dimensions:  Customer segment: Personal, SME, Commercial, Global Data  Line of business 

  11. Slide 11: Non-Life Reserve Disclosure 2015 - This document

    Non-Life Reserve Disclosure 2015 THIS DOCUMENT  Overview of the disclosure  The Zurich Way of Reserving  Using the data  Supplementary information – Non-Core Business – Using Schedule P © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 11

  12. Slide 12: Using the data

    Using the data CLAIMS TRIANGLES  Reserving basics  Key features in the data © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 12

  13. Slide 13: Reserving basics – chain-ladder example

    Reserving basics – chain-ladder example EUROPEAN PROPERTY PAID LOSSES (USDm) CALCULATION STEPS Paid at end of year: 1 2 3 4 5 6 Ultimate 2010 606 1,103 1,197 1,220 1,230 1,235 ? 1. Calculate loss development 2011 560 972 1,055 1,091 1,098 ? factors Accident 2012 568 1,008 1,082 1,106 ? Year 2013 515

  14. Slide 14: Reserving basics – chain-ladder example

    Reserving basics – chain-ladder example EUROPEAN PROPERTY PAID LOSSES (USDm) CALCULATION STEPS Paid at end of year: 1 2 3 4 5 6 Ultimate 2010 606 1,103 1,197 1,220 1,230 1,235 1,235 4. For each cell multiply paid 2011 560 972 1,055 1,091 1,098 1,103 1,103 amount by selected Accident 2012 568 1,008 1

  15. Slide 15: Key features in the data

    Key features in the data  North America Commercial fifth diagonal Auto  Europe case estimate strength General  Current Accident Year volatility Liability Workers  Tail factors Compensation © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 15

  16. Slide 16: Claims system conversion in 2011 distorts one diagonal

    Claims system conversion in 2011 distorts one diagonal NAC AUTO PAID LOSS DEVELOPMENT FACTORS Development Interval 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9 - 10 10 - Ultimate 2006 1.597 1.317 1.160 1.094 1.384 1.026 1.013 1.008 1.008 2007 1.722 1.291 1.141 1.528 1.042 1.033 1.015 1.011 2008 1.521 1.246 1.6

  17. Slide 17: Experience of older years is not always a good indicator of future development

    Experience of older years is not always a good indicator of future development EUROPE AUTO INCURRED LOSS DEVELOPMENT FACTORS Development Interval 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9 - 10 10 - Ultimate 2006 1.044 0.974 0.980 0.984 0.986 0.994 0.997 0.990 0.999 2007 1.083 0.977 0.984 0.983 0.995 0.998 0

  18. Slide 18: Key features in the data

    Key features in the data  North America Commercial fifth diagonal Auto  Europe case estimate strength General  Current Accident Year volatility Liability Workers  Tail factors Compensation © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 18

  19. Slide 19: Large losses in 2015 will not develop like prior years

    Large losses in 2015 will not develop like prior years - chain-ladder can overstate reserves NAC LIABILITY INCURRED LOSSES (USDm) Development Year 1 2 3 4 5 6 7 8 9 10 2006 323 773 1,243 1,567 1,671 1,837 1,894 2,041 2,117 2,170 2007 291 831 1,306 1,512 1,715 1,819 1,905 2,035 2,067 2008 336 803 1,2

  20. Slide 20: Large losses in 2015 will not develop like prior years

    Large losses in 2015 will not develop like prior years - chain-ladder can overstate reserves NAC LIABILITY INCURRED LOSSES (USDm) Development Year 1 2 3 4 5 6 7 8 9 10 2006 323 773 1,243 1,567 1,671 1,837 1,894 2,041 2,117 2,170 2007 291 831 1,306 1,512 1,715 1,819 1,905 2,035 2,067 2008 336 803 1,2

  21. Slide 21: Key features in the data

    Key features in the data  North America Commercial fifth diagonal Auto  Europe case estimate strength General  Current Accident Year volatility Liability Workers Compensation  Tail factors © Zurich August 11, 2016 Non-Life Reserve Disclosure 2015 21

  22. Slide 22: Tail factors need extrapolation of the triangle or external data

    Tail factors need extrapolation of the triangle or external data NAC WORKERS COMPENSATION INCURRED DEVELOPMENT FACTORS Development Interval 1–2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9 - 10 10 - Ultimate 2006 1.520 1.182 1.097 1.069 1.037 1.023 1.024 1.014 1.009 ? 2007 1.567 1.181 1.096 1.039 1.037 1.020 1.014

  23. Slide 23: Simple metrics can be misleading

    Simple metrics can be misleading RESERVE TO PREMIUM RATIOS BY CALENDAR YEAR (%) 180%  Comparing all AY reserves by the current premium produces a volatile 170% measure  Timing effects, such as growth and portfolio exits, or 160% catastrophes can be significant  FX fluctuations add further 150% vo

  24. Slide 24: Key messages

    Key messages The Zurich Established over a decade ago and proven track record Way Technical Finely segmented data, full range of methods and business insight excellence Using the This published data can be used for high level assessment data Reserve We are confident in our approach and the adequacy

  25. Slide 25: Disclaimer and cautionary statement

    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’).

  26. Slide 26: Supplementary Exhibits

    @ ZURICH Supplementary Exhibits

  27. Slide 27: Data release overview

    Data release overview INDEX OF TRIANGLES INCLUDED IN SEPARATE EXCEL FILE • Business sub-division:  Europe  Global Corporate  North America Commercial • Lines of business:  Auto  Liability  Property  Specialty  Workers Compensation • Data, gross of reinsurance1:  Paid losses  Case incurred

  28. Slide 28: Disclosed data covers ~70% gross non-life reserves excluding ULAE

    Disclosed data covers ~70% gross non-life reserves excluding ULAE RECONCILIATION OF DISCLOSED RESERVES TO IFRS RESERVES, FY-15 (USDbn) 63.0 -1.5 61.3 -6.6 -4.1 -8.6 42.1 Gross IFRS ULAE Gross IFRS AYs 2005 Non-Core Other1 Gross Disclosed Reserves Reserves & prior Reserves excl. ULAE © Zurich 1 Inclu

  29. Slide 29: Non-Core Business Portfolios

    Non-Core Business Portfolios SPLIT OF GROSS NON-LIFE NON-CORE RESERVES FY-15 gross reserves of USD 4.1bn Non-Core consists of the following portfolios: • UK Disease Other  Majority of reserves relate to long tailed Non-Core disease, including asbestos • ZNA Pre-1986 excluding Workers Compensation 

  30. Slide 30: Using Schedule P for Zurich American Insurance Company (ZAIC)

    Using Schedule P for Zurich American Insurance Company (ZAIC)

  31. Slide 31: Schedule P excludes Canada and includes some Non-Core business

    Schedule P excludes Canada and includes some Non-Core business ZURICH INSURANCE GROUP ZURICH AMERICAN1 GROSS VIEW ZURICH AMERICAN1 NET VIEW2 FY-15 total gross reserves: USD 63.0bn FY-15 total gross reserves: USD 30.3bn FY-15 total net reserves: USD 14.2bn 64% US (NAC, GC and Other) US Non-Core US No

  32. Slide 32: Zurich's Schedule P net loss ratios are distorted by internal reinsurance

    III Zurich’s Schedule P net loss ratios are distorted by internal reinsurance over all lines Featured: Workers Compensation Net AY LR, % Industry1 Peer Group2 ZAIC 101 100 100 93 91 91 89 88 88 88 88 86 85 82 81 81 79 80 77 75 75 72 72 74 73 73 73 73 66 67 2006 2007 2008 2009 2010 2011 2012 2013 201

  33. Slide 33: Zurich's internal reinsurance treaty inflates net loss ratio as ULAE is not ceded

    III Zurich’s internal reinsurance treaty inflates net loss ratio as ULAE is not ceded Premium ZAIC cedes 50% of Premium Whole Account Quota Share Loss & ALAE ZAIC cedes 50% of Losses and ALAE Agreement ULAE ZAIC retains 100% of ULAE (‘Adjusting and Other Unpaid’) As a result, Net Loss Ratio is infla

  34. Slide 34: Excluding ULAE closes loss ratio gap but does not eliminate it

    Excluding ULAE closes loss ratio gap but does not eliminate it Featured: Workers Compensation Net AY LR ex ULAE, % ULAE 89 85 87 88 74 74 75 81 80 78 82 75 76 80 80 72 74 70 68 69 74 65 68 66 67 66 66 59 62 56 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Industry Statutory Financia

  35. Slide 35: Remaining gap is the result of higher reserves for IBNR claims

    Remaining gap is the result of higher reserves for claims incurred but not yet reported Featured: Workers Compensation breakdown of Net AY LR ex ULAE, % Share of IBNR Share of Reported losses 8% 9% 11% 12% 14% 17% 22% 28% 37% 57% Industry1 9% 10% 13% 15% 16% 20% 27% 35% Peer 46% 66% group2 18% 18% 1

  36. Slide 36: Our tail factors are consistent with this view on a paid basis

    Our tail factors are consistent with this view on both on a paid … ZAIC WORKERS COMPENSATION PAID AT 10 YEARS TO ULTIMATE RATIOS1 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Peer 1 Peer 3 Peer 5 Peer 7 ZAIC Peer 2 Peer 4 Peer 6 Industry2 Source: U.S. Indust

  37. Slide 37: … and incurred basis

    … and incurred basis ZAIC WORKERS COMPENSATION INCURRED AT 10 YEARS TO ULTIMATE RATIOS1 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Peer 1 Peer 3 Peer 5 Peer 7 ZAIC Peer 2 Peer 4 Peer 6 Industry2 Source: U.S. Industry Statutory Financial Statements for the

  38. Slide 38: For further information

    For further information CALL US VISIT OR FOLLOW US Investor Relations Richard Burden +41 44 628 96 40 Aaron Beharelle +41 44 625 25 50 André Meier +41 44 625 37 75 Gianni Vitale +41 44 625 48 26 Rating Agency Management Michèle Matlock +41 44 625 28 50  Investor Relations website  Financial result

  39. Slide 39: Calendar

    Calendar: - September 27-29, Bank of America Merrill Lynch conference, London - November 10, 2016, Results for the nine months to September 30, 2016 - November 17, 2016, Investor Day, London - February 9, 2017, Annual Results 2016 © Zurich Insurance Company Ltd

Zurich Insurance Group — FY2015 Earnings Presentation on 6ix