Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Investor Day (June 2006)
94 slides from Zurich Insurance's investor day presentation, Jun 29, 2006
Slide 1: Transforming North America Commercial to a winner in the marketplace
Transforming North America Commercial to a winner in the marketplace Investors’ Day London, June 29, 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 predictions of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our strategic dire
Slide 3: Introduction
Introduction Axel P. Lehmann CEO North America Commercial
Slide 4: Topics and speakers
Topics and speakers Introduction Axel P. Lehmann Transforming NAC to a winner in the marketplace Axel P. Lehmann Underwriting and Accumulation Management Gary S. Kaplan Portfolio Management Nancy D. Mueller Executing the Transformation John H. Lynch Winning in Small Business Richard J. Law Closing R
Slide 5: Key messages
Key messages • NAC has undergone a step change in its business model • The Zurich Way has already delivered substantial benefits • Profitable growth will be achieved through active re-shaping of our portfolio of businesses and a comprehensive set of initiatives • We are transforming to a next genera
Slide 6: The U.S. has the world's largest commercial insurance market
The U.S. has the world’s largest commercial insurance market with premium of USD 260bn Premium by Line of Business1 Premium by Distribution Channel2 Commercial Direct: 0.3% Other: 36% Multi Peril: 13% Tied Agents: 19.5% Workers’ Comp: 18% Independent Agents and Brokers: 80.2% General Auto: 12% Liabi
Slide 7: Zurich is the third largest commercial insurer in the U.S.
Zurich is the third largest commercial insurer in the U.S. Top 10 Commercial Writers1 Direct Written Market- Premiums (USD bn) share 1. AIG 29 11% 2. St. Paul Travelers 16 6% 3. Zurich2 13 5% 4. Liberty Mutual 11 4% 5. CNA 9 3% 6. Chubb 9 3% 7. Hartford 8 3% 8. ACE 7 3% 9. State Farm 6 3% 10. Nation
Slide 8: Zurich is represented by three Business Divisions in the U.S.
Zurich is represented by three Business Divisions in the U.S. Global Corporate North America Commercial Farmers Management in North America (NAC) Services1 2005 GWP: 2005 GWP: 2005 GWP: USD 2.8 billion USD 12.5 billion USD 14.5 billion • Leading market position • 15,000+ independent agents and broke
Slide 9: North America Commercial has a well diversified business portfolio
North America Commercial has a well diversified business portfolio… 2005 GWP by Line of Business 2005 GWP by Major Business Unit Small Other General UUG A&H Business Liability Surety Surety Business Programs Owners Inland Special- Marine ties Con- Auto struction Canada Workers’ Property Comp Energy
Slide 10: Utilizing multiple distribution channels
… utilizing multiple distribution channels 2005 GWP by distribution channel Global National/Regional Brokers: 18% Brokers: 19% Direct: 0.3% Program Administrators: 8% Tied Agents1: 15% Independent Agents: 40% 2005 GWP: USD 12.5 billion 1 Mainly UUG © Zurich Financial Services - Investors’ Day, June
Slide 11: NAC achieved strong results in Q1 2006
NAC achieved strong results in Q1 2006 with continued conservative reserving approach in USD millions Q1 2006 Q1 2005 FY 20051 Gross written premiums 2,889 2,752 12,511 Net earned premiums 2,273 2,080 9,152 Net underwriting result 107 51 -574 Business Operating Profit 317 141 223 Loss ratio 69.3% 71
Slide 12: Transforming NAC to a winner in the marketplace
Transforming NAC to a winner in the marketplace Axel P. Lehmann CEO North America Commercial
Slide 13: The roadmap to sustainable competitive advantage
The roadmap to sustainable competitive advantage Creating a Stable Foundation Developing Transforming Establishing Sustainable our Operating Technical Competitive Model Discipline Advantage Enabling Profitable Growth © Zurich Financial Services - Investors’ Day, June 29 , 2006 13
Slide 14: Transforming NAC to a winner in the marketplace
Transforming NAC to a winner in the marketplace Creating a Stable Foundation Developing Transforming Establishing Sustainable our Operating Technical Competitive Model Discipline Advantage Enabling Profitable Growth © Zurich Financial Services - Investors’ Day, June 29 , 2006 14
Slide 15: In Q4 2004, we recognized a need to strengthen leadership, controls and governance
In Q4 2004, we recognized a need to strengthen leadership, controls and governance Market conditions: • Regulatory investigations • Increased hurricane activity • Peak of market cycle Strengths: Weaknesses: + Strong market position - Volatile earnings history and insufficient + Significant accident
Slide 16: We created new roles and recruited external talent
We created new roles, put the top team in new jobs and recruited external talent Creating a Stable Foundation Enhanced leadership Strengthened Finance Improved Governance & talent base & controls & processes • Created new Executive Committee (8 of 12 new in position) and Senior Management team (12 o
Slide 17: We strengthened finance and controls
We strengthened finance and controls… Creating a Stable Foundation Enhanced leadership Strengthened Finance Improved Governance & talent base & controls & processes • Delivered step changes in reserve position through implementation of The Zurich Way of Reserving¹ • Shifted focus from expense ratio
Slide 18: And improved governance
… and improved governance Creating a Stable Foundation Enhanced leadership Strengthened Finance Improved Governance & talent base & controls & processes • Installed new governance structure • Consolidated 8 BUs into 3 Business Groups, launched UUG integration • Implemented new Marketing and Regional
Slide 19: Take aways – Creating a Stable Foundation
Take aways – Creating a Stable Foundation • U.S. is the world’s largest commercial insurance market • U.S. market is challenging, but full of opportunity • As a leader in this market, NAC has mastered and will continue to master this challenging environment • NAC has a stable foundation in place to
Slide 20: Transforming NAC to a winner in the marketplace
Transforming NAC to a winner in the marketplace Creating a Stable Foundation Developing Transforming Establishing Sustainable our Operating Technical Competitive Model Discipline Advantage Enabling Profitable Growth © Zurich Financial Services - Investors’ Day, June 29 , 2006 20
Slide 21: First wave of The Zurich Way initiatives is fully implemented
First wave of The Zurich Way initiatives is fully implemented1 Establishing Technical Discipline Underwriting Claims “Charging the right price “Paying the appropriate for the underlying risk” amount per claim merits” • Upgraded Technical Price • Establish best practices, in sophistication particular
Slide 22: NAC has increased consistency and rigor of processes, controls and metrics
NAC has substantially increased the consistency and rigor of its processes, controls and metrics • Detailed underwriting narratives, clear definition of Consistent minimum information required prior to quote processes • Implementation of automated risk selection and pricing tools, clear guidelines f
Slide 23: Underwriting and claims leakage are now at best in class levels
Underwriting and claims leakage are now at “best in class” levels Underwriting leakage Claims leakage 19% 20% 20% 15% 15% 10% 10% 7% 6% 6% 6% 4% 3% 3% 5% 5% 0% 0% 2003 2004 2005 2006P 2003 2004 2005 2006P Underwriting leakage significantly Claims leakage significantly reduced by 13 percentage points
Slide 24: NAC's rate changes remain ahead of the commercial lines industry
NAC’s rate changes remain 4 to 5 points ahead of the commercial lines industry Commercial Lines Rate changes1 5% 0% -5% -10% Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 NAC CIAB Mkt Scout ¹ Source: Company data, CIAB, Marketscout © Zurich Financial Services - Investors’ Day, June 29 , 2006 24
Slide 25: All NAC business units are maintaining positive margins to Technical Price
All NAC business units are maintaining positive margins to Technical Price Policy year 2006 – Ratio of actual premium to Technical Price1 (in%) + 20% margin + 10% margin Technical Price level BU 1 BU 2 BU 3 BU 4 BU 5 BU 6 BU 7 Total2 Plan Q1 2006 Actual Q1 2006 1 Actual premiums based on rating plan
Slide 26: Take aways – Establishing Technical Discipline
Take aways – Establishing Technical Discipline • The Zurich Way of underwriting and claims management is fully in place – technical discipline has been firmly established • Underwriting and claims leakage are now at “best in class” levels • We have the rigorous processes, controls and metrics in pla
Slide 27: Transforming NAC to a winner in the marketplace
Transforming NAC to a winner in the marketplace Creating a Stable Foundation Developing Transforming Establishing Sustainable our Operating Technical Competitive Model Discipline Advantage Enabling Profitable Growth © Zurich Financial Services - Investors’ Day, June 29 , 2006 27
Slide 28: Four improvement levers are central to driving profitable growth
Four improvement levers are central to driving profitable growth Deliver increased profit Build world class product per unit of risk management capabilities • Shrink unattractive • Develop proprietary segments Enabling Profitable Growth insights • Grow attractive • Create market segments Improve Por
Slide 29: The business portfolio is being reshaped to maximize profit per unit of risk
The business portfolio is being reshaped to maximize profit per unit of risk • 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 lenses: Market Basket - Margin
Slide 30: Each market basket is categorized as grow, fix or shrink
Each market basket is categorized as “grow”, “fix” or “shrink” Sample market Plan GWP baskets growth rate Basket 1 Basket 2 “Grow” Basket 3 Basket 4 “Fix” Basket 5 Basket 6 “Shrink” Basket … -20.0% -10.0% 0.0% 10.0% 20.0% © Zurich Financial Services - Investors’ Day, June 29 , 2006 30
Slide 31: Action plans outline the steps required to achieve the desired outcome
Action plans are developed outlining the steps required to achieve the desired outcome Basket 1 Basket 2 “Grow” Basket 3 Basket 4 “Fix” Basket 5 Basket 6 “Shrink” Basket … -20.0% -10.0% 0.0% 10.0% 20.0% Example action plans for a Market Basket Milestone / Actual Planned Actual Complete Stoplight Del
Slide 32: Sophisticated Product Management capabilities will deliver proprietary insights
Sophisticated Product Management capabilities will deliver proprietary insights Develop proprietary insights • Increased granularity of claims coding Progress to date • Predictive modeling • U.S. Small Business – new • New pricing variables Product Management installed Create market leading products
Slide 33: Creating a single face to the market
Creating a single face to the market allows us to maximize the value of distributor relationships Moving from BU to enterprise relationships Enterprise Relationship SB SB Manager (ERM) Constr. Constr. Distributor Distributor MM MM Distributor Distributor Spec. Spec. Other Other Past model ERM model
Slide 34: Managing for both profitability and growth
We are taking a holistic view of performance and managing for both profitability and growth Develop deeper relationships with High targeted distributors (A) Main- • Improved targeting Profitability Grow volume (B) tain • Increased field focus on preferred Medium (A) distributors • Deeper distributor
Slide 35: Freeing-up front-line capacity for higher value activities
Freeing-up front-line capacity allows underwriters to focus on higher value activities Distribution of underwriter time1 Lower value activities: freed-up 15-25% of capacity by eliminating and transferring tasks to u/w assistants 15-25% Re-focused capacity on higher value activities • Increased under
Slide 36: Transforming NAC to a winner in the marketplace
Transforming NAC to a winner in the marketplace Creating a Stable Foundation Developing Transforming Establishing Sustainable our Operating Technical Competitive Model Discipline Advantage Enabling Profitable Growth © Zurich Financial Services - Investors’ Day, June 29 , 2006 36
Slide 37: Our transformation program creates a sustainable advantage
Our comprehensive transformation program creates a sustainable advantage E nabling P rofitable Growth Establishing Improve P ortfolio E nhanc e P roduc t Technical Management Management Transforming Sustainable Discipline – our operating advantage “The Zurich C reate front line L everage model Way”
Slide 38: Transforming our operating model to meet core customer needs
We are transforming our operating model to meet the needs of our core customer segments Align all elements of our …to efficiently and …and meet the operating environment… effectively execute our needs of our core core processes… customer segments Product Management People Processes Small Marketing a
Slide 39: The transformation of our operating model will drive substantial value
The transformation of our operating model will drive substantial value • Simplify the operating environment • Pooled / “at-scale” investments • More consistent core processes across businesses • Shared services / utilities used by multiple businesses • Integrated approach will create a flexible, sta
Slide 40: NAC transformation contributes to group-wide Zurich Way initiatives
NAC transformation contributes significantly to group-wide Zurich Way initiatives Total Group: USD 500m NAC: USD 235m 49% Distribution1 Total Group: USD 500m NAC: USD 100m 11% Claims 32% 21% 28% Underwriting 36% 12% Expenses 11% 2006 Plan 2007 Plan 1 Distribution includes Portfolio Management and Pr
Slide 41: Key take aways – Transforming NAC to a winner
Key take aways – Transforming NAC to a winner in the marketplace • Technical Discipline has been firmly established over the past 3 years – we have a solid foundation to build on • Sophisticated portfolio management process defines where we compete • Profitable growth in target segments is driven th
Slide 42: Underwriting and Accumulation Strategy
Underwriting and Accumulation Strategy – “We know what we write, we write what we know” Gary Kaplan Chief Underwriting Officer NAC
Slide 43: Controls manage risk at the portfolio and account level
Controls are in place to assure we manage risk at the portfolio and account level Portfolio management Accumulations strategy “we know what we write” • Loss estimation Zurich Risk Policy • Capacity allocation Global CUO • Risk selection and pricing • Transparency into aggregate Business Division acc
Slide 44: Maintaining transactional excellence throughout changing market conditions
Maintaining transactional excellence throughout changing market conditions • More than 85%1 of the book has been reviewed for file level insight, 30% of the book has been reviewed twice • Underwriting tools and business solutions continue to be improved • Embedded process controls • Metrics continue
Slide 45: Indicators of underwriting quality are holding steady
Indicators of underwriting quality are holding steady Business Unit example Quality risk engineering account analysis 99.2% 98.9% Operational scorecard 91.4% 93.1% 88.6% 81.2% 85.9% Sep ‘05 Dec ‘05 Mar ‘06 Rate change on Property renewals 21.0% 11.3% 7.8% 8.5% 2.6% -3.2% -0.6% Sep ‘05 Dec ‘05 Mar ‘0
Slide 46: Evolving the accumulation strategy
Evolving the accumulation strategy From CAT management 2004 To proactive CAT accumulation strategy 2005 • Primary focus on CAT modeling • Proprietary insights supported • Managing accumulations by CAT models • Portfolio based CAT pricing • Optimizing returns • Opportunistic CAT growth • Risk Based C
Slide 47: The four parts of our accumulation strategy
The four parts of our accumulation strategy Loss Estimation Capacity Allocation Risk Selection and Pricing Transparency into Aggregate Accumulations © Zurich Financial Services - Investors’ Day, June 29 , 2006 47
Slide 48: Loss Estimation – building proprietary insights into predictive models
Loss Estimation – building proprietary insights into predictive models • Detailed post-CAT claims reviews in 2004-2005 • Upgraded modeling and technical consultative capabilities • Enhanced loss estimation process © Zurich Financial Services - Investors’ Day, June 29 , 2006 48
Slide 49: Two thirds of carriers revised Katrina loss estimates – Zurich did not
Two thirds of carriers reporting Katrina losses revised their initial estimate – Zurich did not Net loss estimates in USD millions1 Primary Insurers Reinsurers Zurich2 725 725 Reinsurer A 1,611 2,186 Carrier A 550 598 Reinsurer B 507 1,247 Carrier B 800 957 Reinsurer C 569 826 Original loss estimate
Slide 50: Capacity Allocation
Capacity Allocation – optimizing capacity with transactional excellence-like rigor • Define capacity using Probable Maximum Loss (PML) • Set specific capacity limits for each business based on return • Track leading indicators of adherence to capacity allocation targets using monthly scorecards © Zu
Slide 51: Multiple factors are used to maximize return on capacity
Multiple factors are used to maximize return on capacity Capacity allocated to segments with: Pricing power considerations • Pricing power • Ability to set pricing that reflects current view of risk • Geographic dispersion of risk • Adequate pricing to provide sufficient return on risk based • Super
Slide 52: Early results show reduced volatility with higher margins
Early results show reduced volatility with higher margins Example: Wind Probable Maximum Loss for Florida Reduction in wind exposure (in%)1 100 94 89 • Projected reduction in 82 wind exposure by ~20% in 12 months • 13% increase in property premium (Jan-May 2006 vs. Jan-May 2005) Jun 05 Dec 05 Mar 06
Slide 53: Risk Selection and Pricing
Risk Selection and Pricing – front-line underwriters know what they write • More technical price tiers • CAT modeling tools embedded in front-line underwriting process • Proprietary insights from recent experience drive improvements to risk selection and pricing process © Zurich Financial Services -
Slide 54: Every risk is passed through filters that assess its attractiveness
Every risk is passed through filters that assess its attractiveness Multi-line account with Good fire Acceptable Other acceptable quality? risk? wind quality? criteria? Detailed Submissions CAT Quote Exposure Analysis No No No No Accounts that do not pass the filters are flagged for special attentio
Slide 55: Monthly reports result in 71% reduction in CAT exposure
Monthly reports direct businesses to favorable risks resulting in 71% reduction in CAT exposure By remediating accounts with low premium relative to CAT exposure… Premium / AAL1 ratio for renewals … Zurich has achieved: Account A Accounts with the least • 85% retention Account B premium dollars per
Slide 56: Transparency – a broader view of aggregate accumulations
Transparency – creating a broader and deeper view of aggregate accumulations • Increase frequency of accumulations review • Empower underwriters with tools to access aggregate exposure (multi-line database for terrorism exposure) © Zurich Financial Services - Investors’ Day, June 29 , 2006 56
Slide 57: GUARD tracks aggregate accumulations at location level
GUARD tracks aggregate accumulations at the granular location level Map can zoom in on building details Maps display Zurich exposures at locations Ability to see building data Ability to see building footprints © Zurich Financial Services - Investors’ Day, June 29 , 2006 57
Slide 58: Key take-aways – Underwriting and Accumulations Strategy
Key take-aways – Underwriting and Accumulations Strategy • We manage risks at both the portfolio and account level • We have the transaction level underwriting discipline and controls in place to maintain quality decisions • We have strengthened portfolio level risk management through improved predi
Slide 59: Portfolio Management
Portfolio Management – the right segments, at the right price, at the right time Nancy Mueller Chief Actuary NAC
Slide 60: Portfolio Management defines where to compete
Portfolio Management defines where to compete in the marketplace NAC’s Portfolio Management approach: • Defines WHERE we will compete in order to maximize growth, profits and optimize capital utilization • Defines a process to prioritize opportunities • Ensures that the Zurich portfolio of business
Slide 61: Capital allocation decisions are made at the market basket level
Capital allocation decisions are made at the market basket level Market Baskets represent • Discrete product offerings to specific markets NAC • Businesses which are large enough to analyze and target 8 Business Units • Level at which decisions can be made without impacting other 68 Market Baskets o
Slide 62: Profitability and return on capital assess market basket performance
Both profitability and return on capital are used to assess market basket performance Margin on Premium (Business operating profit / Net earned premium) • Present value of operating profit in % of net earned premium • Reflects the ultimate underwriting result and investment income Return on Risk-Bas
Slide 63: Performance is assessed on retrospective and prospective basis
Performance is assessed on both a retro- spective and prospective basis Retrospective performance Output – ranking of attractiveness for all market baskets • 10 years of history • 3 years of history 10 yrs 3 yrs Adj. Basket 1 • Years adjusted to current conditions Basket 2 Basket 3 Basket 4 Prospect
Slide 64: Portfolio Management is integrated with pricing, reserving and reviews
Portfolio Management is integrated with pricing, reserving and operating review processes Key Inputs: U/W, Claims, Pricing & Trend Data Reserving Pricing Portfolio Management Process Review Quarterly Operating Reviews © Zurich Financial Services - Investors’ Day, June 29 , 2006 64
Slide 65: All market baskets are force ranked
All 68 market baskets are force ranked based on profitability and return on capital Example distribution of market baskets • Force ranking on two separate dimensions Higher always splits your book Margin on premium into - 1/3 above average - 1/3 average - 1/3 below average • Markets baskets in the l
Slide 66: Capital is allocated to market baskets; plans at segment level
Capital is allocated to market baskets – operational plans are made at a more granular segment level Q1 2006 GWP Margin on Return on RBC Business unit X in USD m Premium Specialty Auto -- -- -- Long haul trucks -- -- -- Tow trucks -- -- -- Taxis / Limos -- -- -- Fuel haulers -- -- -- Market Basket B
Slide 67: Portfolio optimization tool defines the optimal business mix
We use a robust portfolio optimization tool to define the optimal business mix What it is • The Zurich Business Allocation Model helps define the optimal business mix among market baskets under various scenarios • Includes ability to optimize return on capital, return on premium and risk based capit
Slide 68: The portfolio optimizer allows objective trade-offs between scenarios
The portfolio optimizer allows us to make objective trade-offs between different scenarios Scenario 1 Scenario 2 Return on capital Maximize No Decrease Margin on premium Output Maximize Capital consumed No increase Output Higher Example 1 Base plan: +17% Scenario 1: +13% Margin on premium Scenario 2
Slide 69: Key take aways – Portfolio Management
Key take aways – Portfolio Management • Portfolio Management defines WHERE to compete in order to maximize growth, profits and optimize capital utilization • Decisions are based on both retrospective and prospective performance • While capital is allocated to market baskets, operational plans to ach
Slide 70: Executing the Transformation
Executing the Transformation John H. Lynch Executive Vice President
Slide 71: NAC has the capabilities to execute a large-scale transformation
NAC has the capabilities to successfully execute a large-scale transformation NAC successfully delivered … and has the capabilities and its portion of Zurich’s culture in place to deliver on transformation efforts… the current aspiration • Senior leadership commitment (incentives linked) • Rigorous
Slide 72: Rapid Results Initiatives
Rapid Results Initiatives – identifying and capturing near-term improvement opportunities Focus of RRIs Description Opportunities Streamlining • Create and use standard templates, forms and form, formats checklists and stan- documentation dardized procedures • More than 35 RRIs conducted involving •
Slide 73: Winning in Small Business requires re-thinking our operating environment
Winning in Small Business requires us to re-think our operating environment Align all elements of our …to efficiently and …and meet the needs operating environment… effectively execute our of our core customer core processes… segments People Processes Product Management Small Marketing and Distribut
Slide 74: Broader changes that leverage the benefits of our scale
At the same time, we are introducing broader changes that leverage the benefits of our scale • Created single Product Management group to service all “fast flow” business • Developing a more flexible underwriting model for “fast flow” businesses • Leveraging eZSB to automate u/w decisions in selecte
Slide 75: Small Business is the largest commercial lines segment
Small Business is the largest commercial lines segment and a strategic priority for Zurich Small business has the largest portion …and is highly attractive of the U.S. commercial lines market… for a number of reasons • Fastest growing segment • Short tail business • Low capital intensity Small Busin
Slide 76: Addressing historical weaknesses and building on strengths
We are addressing historical weaknesses and building on our areas of strength Weaknesses (2004) Strengths (2004) • Largely construction-oriented book of • Zurich became the 3rd largest small business, mostly in run-off business company in the IA channel in just • Overexposure to windstorm risks in t
Slide 77: Winning in Small Business
Winning in Small Business Richard J. Law President Small Business
Slide 78: Three areas to win in the U.S. Small Business market
We are focusing on three areas to win in the U.S. Small Business market Product development / • Granular product development to expand appetite • CAT management discipline Underwriting • Portfolio management discipline allowing focus on profitable growth opportunities • Segmentation of agencies base
Slide 79: More holistic and integrated management of the book
Adopted a more holistic and integrated management of the book Past: Present and Future: More holistic and integrated approach State: no sharp growth focus by state: good or fix Class: narrow appetite of packaged business with Line automated flow s las C Line: paid below market State commissions in s
Slide 80: Expanding our market appetite
We are expanding our market appetite… Total market Total market potential potential > USD 80bn > USD 80bn Auto ~USD 50bn USD 14bn WC USD 11bn > USD 10bn USD 14bn Prior Product New Expanded appetite Expansion Products appetite © Zurich Financial Services - Investors’ Day, June 29 , 2006 80
Slide 81: Carefully controlling our CAT exposure
… while carefully controlling our CAT exposure Example: Florida Actions taken after 2004 hurricanes Actions taken after 2005 hurricanes • Commercial-Multi-Peril (CMP) • Probable Maximum Loss target guidelines revised and tightened decreased by 25% (40% by Q1 ‘07) • New Business restrictions • Commer
Slide 82: CAT exposure management – Florida CMP example
CAT exposure management has been fully implemented – Florida CMP example Example: Florida Commercial Multi Peril • Red area - no new business - non renewing locations built before 1995 • Statewide Action - non-renewal of all Lessor’s Risk business state wide • Total Insured Value impact of these act
Slide 83: Portfolio management drives optimization of returns across Small Business
Portfolio management drives optimization of returns across the Small Business book Small Business Market Baskets Higher Margin on premium Lower Lower Higher Return on risk-based capital © Zurich Financial Services - Investors’ Day, June 29 , 2006 83
Slide 84: Deepening and broadening our distributor relationships
We are deepening and broadening our distributor relationships Total agency Small commercial Our Actions revenue market share (in %) < USD 0.5 million 29 Increased appointments of smaller agents in targeted USD 0.5 - USD 1.25 million 26 areas USD 1.25 – USD 2.5 million 24 Increased penetration of lar
Slide 85: Strengthening ease of doing business
We are strengthening ease of doing business to increase customer and distributor satisfaction Customer Service Distributor Access Award Winning Technology Virtual Consulting Claims © Zurich Financial Services - Investors’ Day, June 29 , 2006 85
Slide 86: Enhancing our service center
We are enhancing our service center to better serve our customers and agents Present state Future state Zurich Small • Minimal customer access • Improved access to Business • Quality of service limits customers customer satisfaction • Improved customer and agent satisfaction Agents • Significant amo
Slide 87: Insights to win in the U.S. Small Business market
We have developed the insights to win in the U.S. Small Business market Product development / • Granular product development expands our appetite • CAT management discipline addresses accumulations Underwriting • Portfolio management generates focus on profitable growth opportunities • Segmentation
Slide 88: Key take-aways – Small Business
Key take-aways – Small Business • Small Business is the largest and fastest growing commercial segment • The market has clear leaders, no player has a dominant market share, and each has vulnerabilities • Zurich Small Business has leveraged its distribution network and agency interface to dramatical
Slide 89: Closing remarks
Closing remarks Axel P. Lehmann CEO North America Commercial
Slide 90: Integrated transformation program drives substantial economic value
Comprehensive, integrated transformation program drives substantial economic value Opportunity Building Blocks Objective Technical Discipline through The Zurich Way Deliver “best in class” customer and distributor Profitable Growth through the experience development of sophisticated Next Generation
Slide 91: NAC operational initiatives address key drivers of profit improvement
NAC operational initiatives address key drivers of profit improvement Annual profit improvement Area Initiative Driver impact (in USD millions) 2006 2007 Transactional • Underwriting LR1 30 41 Excellence • Claims LR1 • Product Mgmt. GWP / LR1 Profitable • Portfolio Mgmt. LR1 Growth • Distribution GW
Slide 92: NAC transformation has significant multiyear impact
NAC transformation has significant multiyear impact Annual profit improvement Area impact (in USD millions) 2006 2007 • Strong accumulation Transactional 41 30 of benefits Excellence • Full value capture achieved by 2009/2010 Profitable 46 178 Growth • Sustainable performance improvement through Ope
Slide 93: Key messages
Key messages • NAC has undergone a step change in its business model • The Zurich Way has already delivered substantial benefits • Profitable growth will be achieved through active re-shaping of our portfolio of businesses and a comprehensive set of key initiatives • We are transforming to a next ge
Slide 94: Zurich
@ ZURICH OWA