Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — FY2002 Earnings Presentation
28 slides from Zurich Insurance's earnings presentation, Feb 27, 2003
Slide 1: 2002 Annual Results
2002 Annual Results Media Presentation Zurich, February 27, 2003
Slide 2: Agenda
Agenda • Introduction and overview James Schiro • Measuring and monitoring our performance Patrick O’Sullivan • Full year 2002 results Thomas Buess • Closing remarks James Schiro • Q&A © Zurich Financial Services 2
Slide 3: Introduction and overview
Introduction and overview James J. Schiro Chief Executive Officer Zurich, February 27, 2003
Slide 4: Measuring and monitoring our performance
Measuring and monitoring our performance Patrick O’Sullivan Group Finance Director Zurich, February 27, 2003
Slide 5: Key objectives
Key objectives • Financial discipline Reporting one month early Quarterly reporting in 2003 • De-risking Capital allocation program • Transparency in Focus on profit reporting Business operating profit Return on embedded value Operating ROE © Zurich Financial Services 5
Slide 6: Business operating profit
Business operating profit in USD millions 2002 2001 IAS Net Loss -3,430 -387 Special provisions and gains/losses on Add Back 3,203 509 disposals Realized and unrealized capital gains Add Back and losses, including impairments 1,107 -648 Tax expense, adjusting for UK life Add Back 219 380 policyholde
Slide 7: Return on embedded value for the life business
Return on embedded value for the life business • IAS has its limitations • Possible alternatives (Fair Value) only on the long term horizon • Currently, embedded value is an industry wide benchmark • 2002 EV returns: – Total EV Return (after tax,before FX): -15.3% – Operating EV Return (after tax):
Slide 8: Operating return on equity for 2002
Operating return on equity for 2002 in USD millions After-tax Business Operating Profit 784 = 4.8% Average IAS Equity 16,178 • BOP 1,120 * (1- 30% tax) = 784 • Equity (excluding preferred shares) BoY 16, 646 + EoY 15, 709 © Zurich Financial Services 8
Slide 9: Translating operating ROE into IAS ROE
Translating operating ROE into IAS ROE • Factor in impairments, realized and unrealized gains, and unforeseen events • Need to earn 12% blended business operating return on non-life and life businesses • Farmers Management Services earns in excess of 20% © Zurich Financial Services 9
Slide 10: Progress in executing USD 5bn risk-based capital improvement program
Progress in executing USD 5bn risk- based capital improvement program • USD 2.5bn rights offering completed Capital raising successfully in October 2002 USD 2.5–3.0bn • Potential USD 500m hybrid issue by end of 2003 • Exit businesses or lines of business • Selective use of reinsurance (> USD 200m) C
Slide 11: Annual Results 2002
Annual Results 2002 Thomas Buess Chief Financial Officer Zurich, February 27, 2003
Slide 12: 2002 Financial Highlights
2002 Financial Highlights in USD millions 2002 2001 change Total GWP, deposits and policy fees1 62,184 56,194 11% excl. Farmers Exchanges & deposits 41,443 34,764 19% Net investment result 5,016 6,637 -24% of which: realized and unrealized gains/losses -1,107 648 -271% Business operating profit 1,12
Slide 13: Net income after tax
Net income after tax in USD millions 2002 2001 Pre-provision net income 28 319 Impact of special provisions: Reserve strengthening -1,758 Goodwill impairments -727 Write down of E-business and other assets -227 Operational improvement -527 Repositioning of Global Asset business -219 September 11th t
Slide 14: Business operating profit and pre-provision net income by segment
Business operating profit and pre- provision net income by segment Business Oper. Profit Pre-prov. Net Income in USD millions 2002 2001 2002 2001 Non life 403 -128 422 338 Life 739 741 358 614 Farmers 916 853 563 501 Capital Markets & Banking -149 75 -125 89 Centre -130 46 -140 161 Asset Management
Slide 15: Non-life Financial Highlights
Non-life Financial Highlights in USD millions 2002 2001 change Pre-provision Combined ratios (%) GWP 29,798 23,402 27% 2 109.2 Total 103.6 NEP 20,276 16,811 21% 107.1 Pre-provision loss ratio 77.9% 82.3% -4.4ppt NA Corp. 97.2 Expense ratio1 25.7% 26.9% -1.2ppt UKISA & 105.4 Pre-provision AP 100.6 co
Slide 16: Life Financial Highlights
Life Financial Highlights in USD millions 2002 2001 change New business margins (%) GWP, dep. and pol. fees 19,643 17,778 10% excl. DB insurance ops. 17,197 17,778 -3% 4.1 Total 6.1 Business operating profit 739 741 0% Pre-provision net income 358 614 -42% 2.9 NA Cons & LA 12.5 New bus. premiums (AP
Slide 17: Farmers Management Services results
Farmers Management Services results in USD millions 2002 2001 change Management fees 1,799 1,690 6% Management & other expenses 871 836 4% Gross operating margin 51.6% 50.5% 1.1ppt Investment result 60 43 40% Business operating profit 916 853 7% Pre-provision net income 563 501 12% © Zurich Financia
Slide 18: Capital Markets & Banking results
Capital Markets & Banking results in USD millions 2002 2001 change Total Revenues 528 1,018 -48% of which ZCM 372 847 -56% Business operating profit -149 75 -299% of which ZCM -138 115 -220% Pre-provision net income -125 89 -240% of which ZCM -95 118 -181% © Zurich Financial Services 18
Slide 19: Centre results
Centre results in USD millions 2002 2001 change GWP and policy fees 1,567 1,187 32% Total revenues 1,974 1,796 10% Underwriting expenses -237 -177 34% Other operating and admin. expenses -277 -269 3% Business operating profit -130 46 -383% Pre-provision net income -140 161 -187% Net income -186 101
Slide 20: Corporate results
Corporate results in USD millions 2002 2001 change Run-off businesses -47 -128 63% Investment income, net -225 -162 39% of which, Bâloise -544 81 -772% Total expenses -1,300 -1,034 26% of which, GHO gross expenses -299 -374 -20% Pre-provision net income -1,572 -1,324 -19% Business operating profit -
Slide 21: GHO Net Expenses FY2002 reduced by more than USD 120m
GHO Net Expenses FY2002 reduced by more than USD 120m in USD millions 600 522 Revenue 67 Net expenses 400 374 84 299 455 136 200 -36% 290 - 44% 163 0 2000 2001 2002 © Zurich Financial Services 21
Slide 22: Investment results
Investment results in USD millions 2002 2001 change Investment income 6,123 5,989 2% excluding DB insurance operations 5,390 5,989 -10% Realized/unrealized gains/losses -1,107 648 -271% of which: - non-cash asset impairment -956 -838 -14 % - Bâloise swap & options -544 81 -772 % Net investment resul
Slide 23: Cash flows
Cash flows in USD millions 2002 2001 change Cash flow from operating activities 5,629 -1,700 7,329 Cash flow used by investing activities -6,091 437 6,528 Cash flow from financing activities 1,492 3,336 -1,844 Effect of foreign exchange rates 183 -109 +291 Change in cash and cash equivalents 1,213 1
Slide 24: Non-life reserves for losses and LAE
Non-life reserves for losses and LAE in USD millions 2002 2001 change Net reserves for losses and LAE1 27,119 20,882 30% of which : Asbestos 2,030 1,653 23% Environmental 648 628 3% Reinsurance recoverable 16,847 15,289 10% Gross reserves for losses and LAE 43,966 36,171 22% 1) Includes non-life and
Slide 25: Global Asbestos Reserving
Global Asbestos Reserving • Gross reserves at December 31, 2002 were USD 2,572m (2,030m net of reinsurance) • Three year survival ratio of 26 years (direct and assumed business) • Independent actuarial review • An exposure-based review was conducted by Miller, Herbert and Lehman (MHL) in April 2002
Slide 26: Shareholders' equity
Shareholders’ equity in USD millions Net Income –3,430 -155 -481 21'000 -558 951 2,736 28 18'000 -3,458 15'000 12'000 9'000 17,742 16,805 6'000 3'000 0 Balance at Net unreal. Translation Rights Treasury Dividend Pre-Provision Special Balance at Jan 1, 2002 loss on adjustments offering/ stock Net Pro
Slide 27: Closing remarks
Closing remarks James J. Schiro Chief Executive Officer Zurich, February 27, 2003
Slide 28: 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
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