Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Merrill Lynch Conference 2006
29 slides from Zurich Insurance's conference presentation, Oct 5, 2006
Slide 1: Zurich Financial Services: Poised for profitable growth
Zurich Financial Services Poised for profitable growth Patrick O’Sullivan Group Finance Director Merrill Lynch Conference London, October 5, 2006
Slide 2: 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 predications of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our targeted prof
Slide 3: Highlights of Zurich's turnaround
Highlights of Zurich’s turnaround Profit & Loss Balance Sheet Management • Focus on the core • De-risked balance sheet • Customer and market- • Financial rigor • Strengthened capital centric organization • Increased u/w profit and base and reserves • Accumulation manage- discipline • Centrally coord
Slide 4: A track record of performance improvements
A track record of performance improvements Business Operating Profit (in USD millions) Return on common shareholders’ equity 5,000 20% 2 4,000 19.0% 1 15.5% 3,947 10% 12.1% 13.6% 2,847 3,000 1 2,988 0% 2,000 2,316 1,000 -10% -20.8% 1,175 0 -20% 2002 2003 2004 2005 HY06 2002 2003 2004 2005 HY06 Share
Slide 5: Zurich has a well diversified, global book
Zurich has a well diversified, global book Business Operating Profit by Business Operating Profit General Insurance1 segment1,2 Int’l Businesses Global 4% Corporate Other Businesses: 20% USD 298m Europe General Insurance 44% 32% North America Farmers Commercial Mgmt. Services: General USD 615m Insur
Slide 6: Risk, return and growth – an old story with well known trade offs
Risk, return and growth – an old story with well known trade offs Growth • Balanced diversified • Balance profit and portfolio reduces volatility growth for optimal of performance sustainable return • Aggregation management • Exploit economies of within risk tolerances scale and efficient cost base
Slide 7: The Zurich Way is our response to capitalize on these trade offs: by function
The Zurich Way is our response to capitalize on these trade offs: by function… Growth USD 500m USD 500m USD 500m Risk Return 5% 18% 23% 29% Distribution 16% • The 2006 target is 16% Claims well on track 33% • More than 200 36% initiatives in 2006 29% U/W • Rigorous tracking 20% and execution 21% 17%
Slide 8: … and by business division
… and by business division Growth USD 500m USD 500m USD 500m Risk Return Europe General 30% 34% 29% Insurance Expected contributions to North key performance indicators America 25% for 2006/07 Commercial 20% Global 47% General Insurance: Corporate 5% 13% Combined ratio: 1.5pts p.a. Global Life: Glob
Slide 9: Implementation examples in our Business Divisions
Implementation examples in our Business Divisions • Europe General Insurance (EGI) • North America Commercial (NAC) • Global Life • Farmers Management Services © Zurich Financial Services - Merrill Lynch Conference, London, October 5, 2006 9
Slide 10: Vision and key focus areas for EGI
Vision and key focus areas for EGI 2010 vision We are implementing pan-European strategies and platforms to consolidate our competitive advantage throughout the value chain • Leading European insurer with top-tier positions in chosen markets • Cost leadership • Sophisticated way of doing business •
Slide 11: The Zurich Way and the Pan-European platform: why they drive profitable growth
The Zurich Way (TZW) and the Pan-European platform: why they drive profitable growth Growth Risk Return EGI Profitable growth Pan-Euro pean Pla tform TZW • Enhanced management control with less friction • Shortened innovation time allows faster responses to customer needs • TZW initiatives spread ou
Slide 12: EGI is transforming multi-channel distribution
EGI is transforming multi-channel distribution to maximize access and customer insight Growth Risk Return Tied agents Brokers • Grow agent base by 1,200 • leveraging large brokers • enhancing point of sales • optimizing IT-connectivity effectiveness improved customer insight • more efficient and eff
Slide 13: Illustrative implementation examples in our Business Divisions
Illustrative implementation examples in our Business Divisions • Europe General Insurance (EGI) • North America Commercial (NAC) • Global Life • Farmers Management Services © Zurich Financial Services - Merrill Lynch Conference, London, October 5, 2006 13
Slide 14: NAC establishing technical discipline
NAC establishing technical discipline – 1st wave of TZW initiatives fully implemented1 Growth Risk Return Establishing Technical Discipline Underwriting Claims “Charging the right price for “Paying the appropriate the underlying risk” amount per claim merits” • Upgraded Technical Price sophisticatio
Slide 15: NAC enabling profitable growth - portfolio reshaped
NAC enabling profitable growth - portfolio reshaped to maximize profit per unit of risk Growth Risk Return • Divide our businesses into 68 market baskets for making capital allocation Force rank businesses to balance capital decisions intensity with operating profit • Analyze performance using two l
Slide 16: NAC managing risk profile and optimizing capital use
NAC managing risk profile and optimizing capital use Growth Multi-line account with Good fire Acceptable Other acceptable quality? risk? wind quality? criteria? Risk Return Detailed Submissions CAT Quote Exposure Analysis No No No No Accounts that do not pass the filters are flagged for special atte
Slide 17: Illustrative implementation examples in our Business Divisions
Illustrative implementation examples in our Business Divisions • Europe General Insurance (EGI) • North America Commercial (NAC) • Global Life • Farmers Management Services © Zurich Financial Services - Merrill Lynch Conference, London, October 5, 2006 17
Slide 18: Global Life – After fixing profitability, our focus is now on growth
Global Life – After fixing profitability, our focus is now on growth Growth New business APE Business operating profit (BOP)3 in USD millions in USD millions Risk Return CAGR 3% CAGR 2,403 2,303 2 10% 2,134 1079 2,008 2,082 856 934 741 746 HY 20064: • APE: +20%5 2001 2002 2003 2004 2005 2001 2002 20
Slide 19: We radically changed the Global Life business model in multiple markets
We radically changed the Global Life business model in multiple markets Growth Risk Return UK Germany Switzerland Zurich International1 • Consolidated • Service company • Changed • Business world- legal entities model business model wide written on • Separated • Restructured for group one single dis
Slide 20: European Embedded Value enhances risk adjusted management of our life business
European Embedded Value (EEV) enhances risk adjusted management of our life business Growth in USD millions as of December 31, 2005 Certainty Risk Return Equivalent VBF 7,701 -917 Time Value of Options & -620 Guarantees Frictional Costs -537 EEV Cost of Non Shareholders’ Market Risk 11,680 Net Asset
Slide 21: Illustrative implementation examples in our Business Divisions
Illustrative implementation examples in our Business Divisions • Europe General Insurance (EGI) • North America Commercial (NAC) • Global Life • Farmers Management Services © Zurich Financial Services - Merrill Lynch Conference, London, October 5, 2006 21
Slide 22: Farmers is driving profitable growth through increased distribution effectiveness
Farmers is driving profitable growth through increased distribution effectiveness Growth Risk Return Property 25% • More effective at attracting and installing new agents … - Record levels of new agent applicants in 2005; 2006 is on pace to surpass that - 5,263 new agent appointments from 2002 Top 5
Slide 23: Farmers is now at an inflection point and is positioned to outperform the market
Farmers is now at an inflection point and is positioned to outperform the market Growth (1) Growth vs. Combined Ratio - YTD June 2006 Risk Return NPW Growth (in %) 4.0 Farmers2 • Surplus development plan 3.0 designed to generate capital 2.0 for profitable growth Progressive3 Allstate State Farm3 • U
Slide 24: Key take aways from Zurich
Key take aways from Zurich • Zurich has been managed to the risk, return and growth paradigm for 3 years • We have been investing through The Zurich Way with more than 200 initiatives only in 2006 and there is more to come • Zurich is well diversified by lines of business and geography • Zurich has
Slide 25: Appendix
@ ZURICH Appendix
Slide 26: Financial highlights - HY 2006
Financial highlights - HY 2006 in USD millions 2006 2005 Change for the six months ended June 30 Business operating profit 2,847 2,305 24% Net income attributable to shareholders 1,957 1,799 9% General Insurance combined ratio 94.8% 96.9% 2.1pts Life Insurance new business profit margin1 17.7% 17.4%
Slide 27: Business operating profit by segment – HY 2006
Business operating profit by segment – HY 2006 in USD millions 2006 2005 Change for the six months ended June 30 General Insurance 1,781 1,385 29% Global Life 557 536 4% Farmers Management Services 615 609 1% Other Businesses 298 154 94% Corporate Functions -404 -379 -7% Total 2,847 2,305 24% © Zuri
Slide 28: General Insurance key performance indicators - HY 2006
General Insurance key performance indicators - HY 2006 Business Operating Profit Combined ratio (%) Global 93.9 in USD millions 2006 2005 Change Corporate 96.4 for the six months ended June 30 Global Corporate 364 270 35% NA 95.7 Commercial 97.7 North America Commercial 568 403 41% Europe 92.9 Europ
Slide 29: Global Life key performance indicators - HY 2006
Global Life key performance indicators - HY 2006 in USD millions 2006 2005 Change Change for the six months ended June 30 in LC4 Business operating profit 557 536 4% Annual Premium Equivalent (APE) 1,163 1,076 8% 20% New business profit, after tax 205 187 10% 19% New business profit margin, after ta
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