Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Investor Day (May 2009)
70 slides from Zurich Insurance's investor day presentation, May 27, 2009
Slide 1: Global Life – Strategy Execution Update
Global Life – Strategy Execution Update Investors’ Day Zurich, May 27, 2009
Slide 2: Disclaimer and cautionary statement
Disclaimer and cautionary statement By attending this meeting where this presentation is made you agree to be bound by the following limitiations. Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predications of or indicate future
Slide 3: Global Life – Strategy Execution Update
Global Life – Strategy Execution Update Mario Greco Global Life Chief Executive Officer Zurich, May 27, 2009
Slide 4: Agenda
Agenda Strategy Execution Update Mario Greco Global transformation Operational execution Global pillar update Global Life Performance Monitoring Debra Broek Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source
Slide 5: Global Life is a key growth engine to deliver the Zurich Group strategy
Global Life is a key growth engine to deliver the Zurich Group strategy Global Farmers Life IM Focus on volume growth EGI GC NAC Focus on margin enhancement Legend for General Insurance business divisions: IM International Markets EGI Europe General Insurance GC Global Corporate NAC North America Co
Slide 6: Our strategy takes a global approach to key distribution channels and customer groups
Our strategy takes a global approach to key distribution channels and customer groups Global distribution Global propositions channels Private Banking Client Solutions Corporate Life International / Countries Distribution IFA/Brokers & Pensions Expats Three global distribution Agents 1 channels to b
Slide 7: Despite current markets our strategy of globalization is unchanged
Despite current markets our strategy of globalization is unchanged Market situation Our response New range of Unwillingness to take risk propositions Customers Preference for guarantees Business model Increased savings Increase low risk investment choices remains unchanged Want a safe pair of hands
Slide 8: Since launching our strategy in May 2008 we implemented a significant transformation program
Since launching our strategy in May 2008 we implemented a significant transformation program... Executing the global strategy Globalizing our local businesses 6 pillars in place and driving global growth Focus on distribution and operational efficiency Propositions prioritized globally Transforming
Slide 9: ...that enables us to profitably grow scale
...that enables us to profitably grow scale Maintaining performance & cost management New Business Margin maintained at > 20% with APE at USD 3,261m (FY08) and USD 721m (Q1-09) Focus on profitability Lean organizational structures Embedding the global strategy Country teams provide local market expe
Slide 10: The core of our strategy is a global approach to distribution and customers
The core of our strategy is a global approach to distribution and customers… Focus on distributors and We focus on three distribution channels customers to deliver our strategy Distributor needs converge by channel Distributor and customer needs, and not products, Our proposition is global in nature
Slide 11: ...based on an industrial value chain delivered locally using global & regional resources
...based on an industrial value chain delivered locally using global & regional resources… Proposition request from country Product Local country Local product specification request Global prioritization of propositions Product Propositions Technical specification of product design Technical manufac
Slide 12: ...which delivers significant operational efficiencies
…which delivers significant operational efficiencies Substantial unit cost reductions in hubs Economies of skill Re-usable propositions with core products and economies of tailored to local market delivery scale Core skills based in regional hubs and global desks IFA/Broker pillar cross-border entry
Slide 13: Global Life – Regional hubs
Global Life – Regional hubs Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global desks
Slide 14: We have hubs in place at varying levels of maturity
We have 5 hubs in place at varying levels of maturity Distribution Propositions Countries European hub International hub Manufacturing hub for most EU propositions A role model of hub implementation Value creation by cross-border sales Already supports our business in 14 Customer segment hubs Levera
Slide 15: Capturing efficiency gains through our German, Austrian and Swiss hub (DACH)
Capturing efficiency gains through our German, Austrian and Swiss hub (DACH) Benefits 1. Cost reductions 2. Process improvements Use of common platforms Increased processing speed Increase in productivity Improved service quality Centralization of processing Accelerate delivery speed of cross- Indus
Slide 16: Global Life – Global Funds Desk
Global Life – Global Funds Desk Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global d
Slide 17: Global Funds Desk implemented to deliver results in 2009
Global Funds Desk implemented to deliver results in 2009 Our 2008 position... …consolidating into a single global Zurich interface leading to efficiency and procurement gains More than 2,000 mutual funds Fund investments to be placed with a and more than 120 fund house limited number of preferred, h
Slide 18: Benefits of the Global Funds Desk to translate to a BOP contribution
Benefits of the Global Funds Desk to translate to a BOP contribution What this means... ...and the benefits Scope ~ 25-30% of total unit-linked assets Fully automated e- are in mutual funds transactions on a high-end platform Savings of up to Volume USD 3-4bn annual new business 10bps expected volum
Slide 19: Global Life – Protection
Global Life – Protection Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global Global D
Slide 20: Global Protection Unit established to focus on our most profitable business
Global Protection Unit established to focus on our most profitable business Protection NBV FY08: Protection APE FY08: 1% USD 238m USD 441m 13% Split by Pillar 24% Complete range of protection Bank Distribution propositions IFA 33% Agents 29% Corporate Life & Pensions Direct and Central Initiatives P
Slide 21: Experienced team appointed at y/e 2008 to drive growth in protection business
Experienced team appointed at y/e 2008 to drive growth in protection business Milestones 2009 UK Group Life Launch Group Life and Group Income Protection propositions launched in February 2009 Targeted at UK large and medium corporates Launch of significant campaign with Banco Sabadell by June 2009
Slide 22: Global Life
Global Life Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global desks Purchasing Risk
Slide 23: Benefits of taking a global view to our distribution and customer pillars
Benefits of taking a global view to our distribution and customer pillars Three global distribution pillars Three global customer pillars Consistent global support Consistent global servicing standards and models of standards to customers within a distribution within a channel customer pillar Growth
Slide 24: Global Life – Bank Distribution
Global Life – Bank Distribution Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global d
Slide 25: Bank Distribution established a central team to execute an integrated Life & General strategy
Bank Distribution established a central team to execute an integrated Life & General strategy Growth Strategy Global Pillar Focus Management responsibility for main relationships Improved penetration and like Deutsche Bank and Banco Sabadell profitability of existing Globally prioritize proposition
Slide 26: Sales and marketing activity has been high with our joint venture banking partners in Spain
Sales and marketing activity has been high with our joint venture banking partners in Spain Sales momentum has been maintained Fast, effective new product launches capturing the Spanish customer needs in current economic climate low risk deposit based short term Net inflows Q1-09 (in EUR millions) 5
Slide 27: Joint venture sales results in Spain exceed expectations to date
Joint venture sales results in Spain exceed expectations to date EUR m 180 160 154 140 135 120 100 92 80 73 60 40 14 19 15 19 20 0 FY08 FY08 APE FY08 FY08 NBV Q1-09 Q1-09 APE Q1-09 Q1-09 NBV APE Plan Actual NBV Plan Actual APE Plan Actual NBV Plan Actual Spain total bank APE and NBV exceeded plan in
Slide 28: Global Life – Agents
Global Life – Agents Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Global desks Purcha
Slide 29: Productivity increase through a distinctive value proposition to Agents across the globe
Productivity increase through a distinctive value proposition to Agents across the globe... Pilot Farmers’ best practices in Switzerland Agent segmentation Support Switzerland pilot implemented in August 2008 Germany launched program in January 2009 Hong Kong to launch program by Q3-09 Selected prog
Slide 30: ...showing early success
…showing early success 2008-2009 with Pilot 2007-2008 without Pilot Swiss individual life applications per week, indexed Swiss pilot +16% average increase in number key initiatives of individual life 130 applications All-round support for 120 Agents on Life Revision of monetary 110 incentives Streng
Slide 31: 2009 plan to further strengthen our value proposition to Agents
2009 plan to further strengthen our value proposition to Agents Key global priorities for 2009 Strategy Lead proposition development to deliver local and global solutions Drive profitable growth Local efforts Review Field Management compensation and follow-through on Initiatives goal alignment for s
Slide 32: Global Life – International / Expats
Global Life – International / Expats Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platforms Glo
Slide 33: Reshaping the International & Expats strategy for continued profitable growth
Reshaping the International & Expats strategy for continued profitable growth Drivers that impact our strategy... …and our response Changes in global regulation, Globally coordinated customer insight, marketing accelerated by the global and product design, with increasingly localized recession … pro
Slide 34: We continue to grow our market share in this profitable customer segment
We continue to grow our market share in this profitable customer segment Offshore life insurance market (excl. US) APE in USD billions CAGR 3.1 2.8 +21% 2.4 2.0 1.5 1.1 CAGR +30% 2003 2004 2005 2006 2007 2008 12% 10% 11% 13% 14% 17% ZIS market share Source: Association of International Life Offices
Slide 35: Global Life – Corporate Life and Pensions
Global Life – Corporate Life and Pensions Global distribution Global propositions channels International / Expats Bank Distribution Private Banking Client Solutions Countries Corporate Life and Pensions IFA/Brokers Agents Enablers In-force management Proposition management Regional hubs and platform
Slide 36: Corporate Life & Pensions pillar provides an excellent response to market needs
Corporate Life & Pensions pillar provides an excellent response to market needs Our strategy… ...and response to market needs Development of large case capabilities Development of multinational capabilities Propositions Entry into new business lines Access new geographies Re Active – use existing Zu
Slide 37: Corporate Life & Pensions pillar is already delivering consistently on its strategy
Corporate Life & Pensions pillar is already delivering consistently on its strategy Implementation successes Launched international pension plan targeted at internationally mobile large employee schemes Propositions Launched Group Risk product in the UK Development of pension capabilities for large
Slide 38: Corporate Life and Pensions strategy has delivered solid APE and NBM performance to date
Corporate Life and Pensions strategy has delivered solid APE and NBM performance to date Key New business APE NBM FY08: Exceeded plan by nearly 30% in USD millions 16% highlights Established a market presence 2008 Experienced team set-up to 414 314 +29% drive growth and develop in LC1 new propositio
Slide 39: Global Life strategy takes a global approach to key distribution channels and customer groups
Global Life strategy takes a global approach to key distribution channels and customer groups Global distribution Global propositions channels Private Banking Client Solutions Corporate Life International / Countries Distribution IFA/Brokers & Pensions Three global distribution Agents Expats 1 chann
Slide 40: Global Life strategy to continue delivering growth through globalization
Global Life strategy to continue delivering growth through globalization Our strategy remains unchanged as we focus on achieving our aspirations We are implementing tactical initiatives to respond to economic markets Globalization remains central to our strategy as the convergence of distributor and
Slide 41: Our strategy direction: A truly global life franchise
Our strategy direction: A truly global life franchise New Business Value1 APE by Pillar APE by region in USD billions in USD billions 5.7 in USD billions 5.7 0.2 North Bank America 1.1 Direct & Central Distribution Initiatives 3.3 2.0 IFA/Brokers 3.3 1.2 2.9 4.0 0.3 Agents 2.9 0.1 0.1 Europe 0.5 0.8
Slide 42: Global Life – Performance Monitoring
Global Life – Performance Monitoring Debra Broek Global Life Chief Financial Officer Zurich, May 27, 2009
Slide 43: Agenda
Agenda Strategy Execution Update Mario Greco Global transformation Operational execution Global pillar update Global Life Performance Monitoring Debra Broek Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source
Slide 44: Agenda
Agenda Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source Focus on new performance measurement metrics – In-force Management Summary May 27, 2009 Global Life - Strategy Execution Update 44
Slide 45: Metrics Overview
Metrics Overview APE by Pillar and Line of Business Growth Net policy holder cash flow Maturity recapture and persistency Profit by source (BOP) Profitability and Total Expenses Value BOP RoE NBV and NBM EV operating profit RBRM RBC Capital/Liquidity Cash remittance Management Cash flow / BOP profil
Slide 46: We are on a journey
We are on a journey Analysis of businesses and sustainability of the business Turnaround model phase Focus on establishing new business measurements European Embedded Value Reporting of Business Operating Profit (BOP) by geography Monitor the local solvency positions Profitable Current metrics growt
Slide 47: Performance measurement is linked to strategy – pillars and countries
Performance measurement is linked to strategy – pillars and countries Global distr. Global channels propositions Pillar metrics: Americas APE New business Value United Kingdom Corporate Life & Pensions Private Banking Solutions New business Margin Germany Countries International / Expats Switzerland
Slide 48: Performance measurement is linked to Strategy - Enablers
Performance measurement is linked to Strategy - Enablers Americas International / Expats Corp. Life & Pensions Bank Distribution United Kingdom Private Banking IFA/Brokers Germany Agents … Policyholder cash flows In-force management Persistency Maturity recapture Margin management Proposition manage
Slide 49: Agenda
Agenda Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source Focus on new performance measurement metrics – In-force Management Summary May 27, 2009 Global Life - Strategy Execution Update 49
Slide 50: Global Life business mix 2008
Global Life business mix 2008 APE compared to in-force reserves reflects the change in strategy New Business APE Total Life Reserves USD 3.3 bn USD 154.6bn 2% Unit-linked Unit-linked 5% 8% 10% Ind. Saving Ind. Saving 14% 34% 46% Corporate Life Corporate Life 13% 4% Ind. Protection Ind. Protection 9%
Slide 51: Global Life product mix by geography
Global Life product mix by geography 2008 New Business APE Total Life Reserves USD 3.3bn USD 154.6bn Total GL Total GL Americas Americas UK UK Germany Germany Switzerland Switzerland Ireland Ireland Spain Spain ZIS ZIS UL + Individual Saving Corporate Life Individual Protection Other May 27, 2009 Gl
Slide 52: Global Life distribution channel and proposition mix 2008
Global Life distribution channel and proposition mix 2008 Global distribution and proposition pillars drive new business growth and value New Business APE New Business Value New Business Margin USD 3.3bn USD 0.753bn Bank Distribution 29% 9% 5% IFA/Broker 16% 23% 9% 10% 28% Agents 40% 9% Corp. Life &
Slide 53: Agenda
Agenda Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source Focus on new performance measurement metrics – In-force Management Summary May 27, 2009 Global Life - Strategy Execution Update 53
Slide 54: Zurich's Profit by Source
Zurich’s Profit by Source Analysis of the IFRS business operating profit into components in a consistent and intuitive way to be able to analyze our profit sources Premium, policy-based and other fees + Fee income including expense premium Fund-based fees + Net risk margin Spread for non unit- Busin
Slide 55: Drivers of source of profits by product class
Drivers of source of profits by product class Protection Spread business Unit-Linked Death/mortality, + Investment + Volumes x Fees disability, longevity income premiums and - Interest credited benefits Sources of Risk Investment margin Fees margin profit Drivers Volume in force Invested asset mix P
Slide 56: Zurich's Profit by Source 2008 results
Zurich’s Profit by Source 2008 results Premium, policy-based and other fees 80% + Fee income including expense premium 3,090 Fund-based fees 20% + Net risk margin Business 570 Operating Spread for non unit- Profit linked business 70% USD 1,480m + Investment margin 770 Shareholder asset return 30% No
Slide 57: Major country Profit by Source profiles for 2008
Major country Profit by Source profiles for 2008 USA UK Germany CH Ireland Others Total BOP 230m 429m 332m 190m 77m 222m 1,480m (in USD millions) Investment margin Risk margin Fees Expenses Our focus is on fee-based business and not spread-managed business with the strategy to increase the risk marg
Slide 58: Benefits of Profit by Source
Benefits of Profit by Source Profit by Source provides the information to link BOP to other metrics and drive the business holistically May 27, 2009 Global Life - Strategy Execution Update 58
Slide 59: Agenda
Agenda Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source Focus on new performance measurement metrics – In-force Management Summary May 27, 2009 Global Life - Strategy Execution Update 59
Slide 60: In-force manager global role established
In-force manager global role established ...maximize the value of the in-force business ...improve internal reporting of in-force management for better decision making The aim is to... and early warning ...implement best practices globally ...support and drive the business to achieve its targets May
Slide 61: Policyholder cash flows are not created equal
Policyholder cash flows are not created equal Most metrics already anticipate maturities so outflows do not impact the result, however… Maturity recapture Maturity outflows do represent a potential recapture opportunity Focus on retention of profitable business Persistency Understanding of the produ
Slide 62: Development of Assets under Management
Development of Assets under Management1 Net flows were positive in Q1-09. AuM decreased due to currency translation and a reduction in the market value of assets. in USD billions FY08 Q1-09 Opening balance 220 180.4 AuM acquired +13 Inflows +23 +5.7 Outflows -25 -5.4 Market move- ments & other2 -27
Slide 63: Net inflows by country in Q1-09
Net inflows by country in Q1-09 Net flows, Q1 2009 Net inflows by country in Q1-09 Spain CH Germany Ireland UK Others Total Growth of the new business cash inflows exceeded the outflows of primarily legacy in-force books Net outflows were less a reflection of the market and more due to the legacy in
Slide 64: In-force management initiatives
In-force management initiatives Launch of short-term deposit type products to assist in the retention of maturing funds Maturity recapture Providing enhanced management information to agents Extensive use of Customer Option/Save Teams to retain surrendering business Persistency Monitoring of distrib
Slide 65: Proposition management
Proposition management Indicative cash Drivers of the pay-back period cash and BOP profiles Split of regular and Unit-linked 5 - 8 years single premiums Investment or Insurance product classification Duration of the business Individual 5 - 6 years Local policyholder saving participation rules Fee st
Slide 66: Agenda
Agenda Global Life metrics and link to the strategy Overview of Global Life portfolio Focus on new performance measurement metrics – Profit by Source Focus on new performance measurement metrics – In-force Management Summary May 27, 2009 Global Life - Strategy Execution Update 66
Slide 67: Summary
Summary Clear process to measure the performance of our strategy Actively manage our profit drivers Focus on new business, but equally on our business in-force Continuing to build further business insights and provide more transparency May 27, 2009 Global Life - Strategy Execution Update 67
Slide 68: Q&A
@ ZURICH Q&A
Slide 69: Appendix
@ ZURICH Appendix
Slide 70: Zurich's Profit by Source - Definitions
Zurich’s Profit by Source - Definitions Fee income incl. Net fee income including the expense + expense premium premium, the change in the deferred front end fees and the surrender fees Death/mortality-, disability-, longevity- + Net risk margin premiums and benefits, the reinsurance result and the