Zurich North America
Risk Management Council
Meeting
Wednesday
Sept. 9, 2009
Welcome & Warm Up
Valerie Butt
EVP
Customer Relationship Mgmt
WARM UP: Question 1
What is the most planted grape varietal in California:
A. Cabernet Sauvingon
B. White Zinfandel
C. Merlot
D. Chardonnay
64.3%
17.9%
A
7.1%
10.7%
B
C
D
3
WARM UP: Question 1
What is the most planted grape varietal in California:
A. Cabernet Sauvingon
B. White Zinfandel
C. Merlot
D. Chardonnay
4
WARM UP: Question 2
The most game-changing event for the Napa Valley was the Paris
Competition of 1976. In a blind tasting that pitted French wines
against California wines, which winery won the White Wine category:
A. Mondavi
B. Krug
C. Chateau Montelena
D. Falcon Crest
57.1%
28.6%
7.1%
A
B
7.1%
C
D
5
WARM UP: Question 2
The most game-changing event for the Napa Valley was the Paris
Competition of 1976. In a blind tasting that pitted French wines
against California wines, which winery won the White Wine category:
A. Mondavi
B. Krug
C. Chateau Montelena
D. Falcon Crest
6
WARM UP: Question 3
Why did the Dry Creek, located in Sonoma, run red in the early part
of the 20th century?
A. Torrential floods in 1909 caused grape soil sediment run off into the creek
B. As part of the Prohibition raids of 1927, federal agents forced the dumping of wine into the
creek.
C. The California Earthquake of 1906 ruptured some of the holding tanks for red wine, spilling it
into the river.
D. As part of the famous 'Alcohol War' of 1914, beer-making vigilantes vandalized local
wineries by throwing the grapes into the river and stomping on them in protest.
64.0%
28.0%
A
B
4.0%
C
4.0%
D
7
WARM UP: Question 3
Why did the Dry Creek, located in Sonoma, run red in
the early part of the 20th century?
A. Torrential floods in 1909 caused grape soil sediment run off into the creek
B. As part of the Prohibition raids of 1927, federal agents
forced the dumping of wine into the creek.
C. The California Earthquake of 1906 ruptured some of the holding tanks for red
wine, spilling it into the river.
D. As part of the famous 'Alcohol War' of 1914, beer-making vigilantes vandalized
local wineries by throwing the grapes into the river and stomping on them in
protest.
8
WARM UP: Question 4
Why do some wines give you a headache?
A. Because you drank too much of them
B. Histamines
C. Sulfites
D. Tannins
76.9%
3.8%
A
3.8%
B
15.4%
C
D
9
WARM UP: Question 4
Why do some wines give you a headache?
A. Because you drank too much of them
B. Histamines
C. Sulfites
D. Tannins
10
WARM UP: Question 5
What does the term 'reserve' in the wine industry mean?
A. It has no legal meaning in the US
B. That it is made only from grapes grown at a specific estate
C. That it is aged for more than 3 years in oak
D. That is won an award in a certified industry competition
40.7%
29.6%
18.5%
A
11.1%
B
C
D
11
WARM UP: Question 5
What does the term 'reserve' in the wine industry mean?
A. It has no legal meaning in the US
B. That it is made only from grapes grown at a specific estate
C. That it is aged for more than 3 years in oak
D. That is won an award in a certified industry competition
12
“Penecillin
may cure human beings, but it is
wine that makes them happy.”
Sir Alexander Fleming, credited with
discovering Penicillin in 1928.
13
Introductions & Agenda
Greg Maguire
EVP
Customer & Distribution Mgmt
Welcome New Members
•
Dan Baldwin - Leggett & Platt
•
Alain Simard - Saputo Inc.
•
Claudia Temple - Kraft Foods
•
Steve Allison - The Shaw Group
•
Stacey Regan - GE
•
Mike Bergines – eBay
•
Bill Zachry – Safeway
•
Dora Pisano – Illinois Tool Works
•
David Spruance – Republic Services
© ZurichZurich -RMC – Lombardo June 2008
15
David Binder – Nestle
Tim Bunt – CBRE
Thank you
for
participating
Vince Coffey – Novelis
Mark Davis – Constellation
Brands
Glenn Peterson – EWI/Contran
Heidrun Toben - Alstom
Meeting Agenda
Wednesday, Sept 9 - morning
Time
Description
Speaker
9:30 am
Zurich & Global Corporate Update
M. Vitale
Q2 Financial Results
State of the Market
10:00 am
Global Corporate in North America
M. Kerner
10:30 am
J. Schupp
11:30 am
Key Regulatory Trends & Impact on
Insurance
BREAK
11:45 am
Customer Satisfaction & Loyalty Study
G. Maguire /
V. Butt
12:30 pm
LUNCH (patio)
17
Meeting Agenda
Wednesday, Sept 9 - afternoon
Time
Description
Speaker
1:15 pm
Hunt for the Golden Bell!
(Bella Donna room)
1:45 pm
Corporate Life in the Americas
S. Zakhary
2:30 pm
Group discussion:
Facilitated by:
What are the pressures risk managers and
their units face today give the economic
downturn? How are risk managers looking at
buying insurance this year and in the future?
JP Fowler
3:00 pm
BREAK
3:15 pm
The Global Economy –
D. Hofmann
Steps Away from the Abyss
4:00 pm
Updates / discussions:
1.
2.
3.
4.
5:15
Policy / contract certainty
Claims trends and services
Supply Chain
International strategy & global network
Wrap-up: Day 1
L. Jablonski
C. Barnes
J. Tocco
P. Horgan
M. Kerner
18
Meeting Agenda
Thursday, Sept 10
Time
Description
Speaker
7:15 am
BREAKFAST
8:00 am
Welcome – DAY 2
G. Maguire
8:15 am
Risk Manager only session
Cypress room
9:30 am
BREAK
9:45 am
Feedback / Q&A / Open Forum
11:15 am
Closing Remarks
M. Kerner
Box Lunches
Departures
19
Why a Risk Management Council?
Mission
Provide an open forum for discussion and information
exchange between Zurich in North America and Risk
Managers
Explore current issues and trends affecting the management
of risk
© Zurich North America
Seek collaborative development of contemporary, tangible
solutions for Zurich in North America and its customers
20
Why a Risk Management Council?
Objectives
Encourage constructive dialog between large corporations and Zurich.
Establish two-way communication between Zurich senior management
and industry representatives on economic, regulatory and social
issues which may affect our industry or our customers' industries.
Create an understanding of Zurich and of its customers' product and
service needs so as to align our respective operations to meet these
needs.
© Zurich North America
Provide Risk Managers an opportunity to exchange information.
21
Why a Risk Management Council?
Council structure and terms of service
Risk managers from large domestic and global companies
Three year terms
-Regular meeting attendance (attend 4 of the 6 meetings)
One third of memberships expire each year
© Zurich North America
One third are new
22
Council members-only web site
© Zurich North America
Accessible
through your
NEW virtual
concierge!
23
HINTS!
24
Zurich & Global Corporate
Update
Mario P. Vitale
CEO
Zurich Global Corporate
26
ZFS & GC 2009 Half-Year Financial Results
State of the Market
Customer centricity in Zurich – we deliver when it
matters
Why Global Corporate is the best positioned insurer to
fulfill customer needs– 6 reasons
27
ZFS 2009 Half-Year Financial Results – Highlights1
In USDm
2009
2008
Change2
Business Operating Profit
2’552
3’549
(28%)
Net income attributable to shareholders
1’254
2’681
(53%)
General Insurance combined ratio
96.2%
96.2%
(0.1 pts)
Global Life New Business margin3
21.0%
22.4%
(1.3 pts)
Farmers Mgmt Services managed GEP margin4
7.3%
7.1%
0.2 pts
Return on common shareholders’ equity (ROE)
10.8%
19.5%
(8.8 pts)
Business operating profit (after tax) ROE
10.8%
19.9%
(3.4 pts)
Zurich achieved impressive results in a challenging environment, recording its 26th quarter of profitability
with a BOP over 2 USD billions and delivering a 10.8% ROE to our shareholders
Although GI GWP and policy fees were down 11% reflecting the difficult conditions of the market, we kept the
combined ratio to 96.2%
Global Corporate delivered a strong set of results, delivering a BOP of 354 USD millions and a combined
ration of 95.7%
1
2
3
4
Snapshot on the summarized consolidated results of the Group for the as of June 30, 2009 & December 31, 2008 respectively. These are unaudited results that should be read in
conjunction with the ZFS Group Annual Report 2008 and the unaudited consolidated financial statements as of June 30, 2009 for further details. Interim results are not necessarily
indicative of full-year results.
Parentheses around numbers represent an adverse variance
After tax, as % of APE (Annual Premium Equivalent)
Margin on gross earned premiums of the Farmers Exchanges. Zurich Financial Services has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned
subsidiary of the Group, provides management services to the Farmers Exchanges and receives fees for its services.
28
Source: ZFS consolidated financial statements as of June 30, 2009
Zurich’s current ratings
Financial Strength Rating
S&P
Moody’s
A.M. Best
Fitch
- Zurich Insurance Company
AA-/Neg
A1/Stable
A/Stable
A+/Neg
- Zurich American Insurance Co.
AA-/Neg
n.r.
A/Stable
n.r.
- Zurich Australian Insurance Ltd.
A+/Neg
n.r.
n.r.
n.r.
How analysts commented our 2009 half-year results:
“ZFS remains one of team’s highest conviction ideas. To us, ZFS is an usual combination of a lowly valued stock and
a relatively less risky company. In contrast to the good and reliable operating performance it has turned in, ZFS’s
shares have been particularly poor performers this year and the shares trade at only 6.4x 2010E, a 30% discount to
the sector.”
Brian Shea, Merrill Lynch
“1H results demonstrated clearly the reasons why we continue to favour ZFS over other major non-life primary
insurers: differentiated geographical mix with relatively less exposure to the problem areas of Italian, German and
French motor and Credit insurance, management’s focus on pricing discipline over volumes and a strong capital
position.”
Richard Burden, Credit Suisse
29
Source: ZFS website; data as of August 4, 2009
Strong performance for the first half with all major
profitability indicators trending positively
Mvt loc
curr
In USD millions / %
2009
2008
Gross Written Premium
4,249
4,494
-5%
+5%
Net Written Premium
2,760
3,129
-12%
-1%
Net Earned Premium
2,402
2,586
-7%
Underwriting Result
104
-13
nm
nm
BOP
354
347
+2%
+11%
Loss Ratio
76.4
80.6
+4.2ppts
+4.6ppts
Expense Ratio
19.3
19.9
+0.7ppts
+0.7ppts
Combined Ratio
95.7
100.5
+4.8ppts
+5.3ppts
Mvt
+3%
Ratios (% NEP)
Source: Snapshot of GC HY 2009 Results – GC Finance
30
State of the Market – Key Challenges
General Economic Outlook
Uneven recovery expected through second
half 2009
Banks health still under thread
High unemployment rates and rising
corporate bankruptcies
Government debt levels and new
macroeconomic imbalances
Inflation as a potential long-term problem
Rise in oil prices
Insurance Sector State
Negative 2009 premium exposure outlook
Compressed operating margins strengthens focus on
underwriting results
Market remains highly competitive although an
upturn in pricing is expected in the next year
Increased need of market segmentation and
coverage offerings
Continued reduction in reinsurance capacity
Broker compensation pressure
US Economic Outlook
Customers aggressively reducing procurement
spend
Us leads the recovery among advanced
economies
More regulatory changes on the horizon as well as
increasing compliance burden
Industrial production appears to have
bottomed out
Several competitors facing balance sheet / financial
strength challenges; possible further consolidations
Household confidence has improved
Dislocation opportunities on talent
Main challenge: labor market
31
Customer centricity in Zurich
- We deliver when it Matters
>PLAY
32
Why Global Corporate is the best positioned
insurer to fulfill customer needs – 6 reasons
3
4
Transparency
& Consistency
2
Professional
Claims &
Customer
Service
5
Global
Network
1
Risk
Engineering
expertise
6
Financial &
Operational
Stability
Relationship
Management
Model
Our customers are at heart of what we do
We aspire to become your favorite insurance partner and commit to
delivering when it matters to you
33
Global Corporate in North
America
Mike Kerner
CEO
Global Corporate in North
America
Update on GCiNA Strategy
Opportunities for Profitable Growth
Operational Transformation
Customer centricity in Zurich – Celebrating the Customer
35
Underwriting Margin Improvement
Overview
Four key components
1. Pricing strategy– taking a differentiated approach
2. Targeted new business writings that meet our target returns
3. Technical Excellence
4. Generate greater fee income through selling more value added
service
36
What can you expect from Zurich?
Global Corporate priorities for 2009
We continue delivering on our Strategy …
Profitability
Expense Management
Talent Management
GC Transformation Program
Change Management
37
What can you expect from Zurich?
Global Corporate priorities for 2009
… in order to deliver what our customers need.
A strong financial partner
Operational excellence
Global and integrated insurance solutions
The right people who think globally & act locally
Delivery “when it matters”
ONE ZURICH Experience
38
Update on Strategy
Staging
The speed and sequencing of our movement balances quick wins and long term capability development
2011 plus
By end 2010
 Investments in profitable growth
opportunities (IPB, geographic expansion,
product expansion)
 Establish GCiAmerica’s
 Develop and execute LATAM entry strategy
 Maximise U/W capacity and cross selling
 Longer term GCTP capabilities
 GCTP Phase 2
 IT transformation
 People Strategy
Underpinned by
Governance
Leading the Market Margin Enhancement Program
Short Term Expense management
Project portfolio management
TZW short term benefits
Proposition Development
39
Opportunities for Growth
International Business (IPB Property, Foreign Casualty)
Bringing the best of Zurich to customers – increase offered line
sizes where appropriate
Expand the Relationship Model – product density, more and better
relationship management.
Product Expansion – A&H, Life, Marine, etc.
Geographic expansion – Latin America
40
The Zurich Journey – Operational
Transformation (GCTP)
1
Configuration
Consolidation
and ownership
(on/offshore)
Standardization,
automation and
streamlining
2
3 Platforms
(IT)
Process
4
People
Training, Capability
building, recruiting
5
From a loosely connected organization to
globally integrated insurer capable of
supporting our brokers and customers,
consistently, efficiently and effectively
Performance
Mgt.
“Many ways of
doing the same”
Standardization
“Loosely
Connected”
“Globally
Consistent”
Integration
Time
Process
Configuration
Platform (IT)
“Globally
Integrated”
People
Performance
Management
41
GCTP Update
Selected Initiatives
WAV/Segmentation
• well understood:, good partnerships with RL and RE communities in
delivering the messages
DTP e-learning modules
• Foundation module available end September 09
• Will include a sales guide for internal use, elevator speech, how to use
VP based sales material, case studies, and testing
VP based sales materials
• Focused on customer challenge, solution, benefit and relevant case
studies
• Powerpoint presentation to use with customers/brokers, brochure, fact
sheet
Proposition Development
• Commitment to additional GCiNA resources – turning customer feedback
into products and services.
Zurich Virtual Concierge
& Virtual Literature Rack
• Zurich is a genuine pioneer in giving individual homepages to our
relationship customers. Each will be provided with exclusive access to a
personalized,home page on the internet through which we can instantly
deliver customer-relevant news and information.
• Launched at RMC meeting
Customer Welcome
Package
• In development, more to come.
42
U.S. Regulatory Trends
Jason Schupp
Head of Regulatory Affairs
North America
43
Natural Catastrophe Financing
44
Insurance model relies on capital
Traditional insurance model holds private capital against catastrophe
risksFunds to compensate loss exist before the catastrophe
Private market competes to accurately match risk and price
Insurance pricing sends clear economic signals to policyholders
Policyholders incented to invest in exposure management and
mitigation
45
Emerging government model relies on debt
Emerging government-based model pledges the right to levy future
assessments against a broad base of policyholdersFunds to compensate loss borrowed after catastrophe event
Borrowed funds repaid with proceeds of policyholder assessments
Liquidity to immediately pay claims secured through pre-event
borrowing
Risk-price signals distorted to meet public policy objectives
Cost of risk externalized from risk-takers
Cost of risk shifted forward in time
46
The difference impacts your business
Government debt financing models increasingly provide low cost, highrisk insurance to coastal home and small business owners
Current and future statewide commercial and personal lines
policyholders will be assessed to pay losses and financing costs
Cash to Pay Claims
Policyholders
of the
State Program
Low Cost
Insurance
State
Program
Assessments to
repay debt
(up to 30 years)
Capital
Markets
Principal & Interest
All
Policyholders
47
47
The 2005 hurricane season was a shock
By 2016 Florida residents and businesses will have paid over $4 billion
through 6 assessments to fund state insurance program losses
Citizens Property Insurance Corporation - $1.7 billion deficit
– Property policyholder assessments
Florida Hurricane Catastrophe Fund – $2.6 billion deficit
– All policyholders assessed except WC, Med Mal, and A&H
Florida Insurance Guaranty Association - $650 million deficit
– All property and certain liability policyholders assessed
– Deficit resulting from Poe Financial failure
Louisiana property policyholders have paid assessments of up to 23%
48
With evidence of breakdowns
Hard hit states intervened to reduce the impact of assessmentsFlorida diverted $715 million of sales tax revenue into Florida Citizens
Property Insurance Corporation after two years of back-to-back
assessments
Louisiana has continued assets in order to pay back bonds, but provides
a 100% income tax credits to policyholders
49
Yet debt-based programs have
exploded
According to data provided by the Florida Office of Insurance
Regulation, if a 100 year storm happened today80% of all residential claims would be funded through a state
government program
65% of all residential insurance claims would be funded with dollars
that do not exist today
The Florida Hurricane Catastrophe Fund and Citizens Property
Insurance Corporation would together suffer a $34.2 billion shortfall
Florida residents and businesses would be assessed a total of $86.6
billion over the next thirty years (to repay principal and financing
costs)
50
And other states have joined
Texas Windstorm Underwriting Association suffered a $530 million deficit
following Hurricanes Dolly and Ike
For future storms, up to $700 billion may be funded through assessments on all policies
insuring coastal county exposures (other than WC, Med Mal, A&H, and Federal Flood)
Mississippi Windstorm Underwriting Association suffered a $545 million
deficit following Hurricane Katrina
2007 legislation permits MWUA to fund its deficits through assessments on all
statewide property and casualty policies (except WC & Med Mal)
North Carolina also recently passed debt-based financing legislation
that could result in property insurance assessments of up to 10%
51
Federal bills would expand the debt model
Multi-Peril Insurance Act (HR 1264) would extend the National Flood
Insurance Act (already some $17 billion in debt) to cover residential and
some commercial wind exposures
Homeowners Insurance Protection Act (HR 83) would create a
federal catastrophe fund to reinsure state insurance programs above a
1:200 season attachment
Catastrophe Obligation Guarantee Act (S 886) would extend a federal
guaranty to debt issued by state insurance programs
Homeowners Defense Act (S 505) would have the US Treasury buy
the debt of state insurance programs
52
But asset accumulations are risky, too
State catastrophe insurance programs often divert a portion of premium
income or investment earnings into other programs
Some states have outright “swept” accumulated assets from insurance
related accounts into general revenue, such as this year:
Arizona guaranty associations ($30 million sweep)
New Jersey surplus lines guaranty fund ($60 million sweep)
Kansas workers compensation fund ($2 million sweep)
53
Zurich opposes post-event financing
Zurich actively opposes the current shift from the traditional insurance
model to assessment-backed government programs
Oppose federal bills that would promote the expansion of existing state
programs and creation of new state programs
Served on Florida Citizens Property Insurance Corporation Mission
Review Task Force to raise awareness of Florida’s precarious financial
position
Support legislation that encourages responsible land use, investment in
mitigation, tax incentives and risk-based pricing
Promote “gate-keeping” processes to restrain growth of state insurance
mechanisms
54
Zurich seeks to improve existing facilities
Local political pressure to shift the cost of consumer catastrophe
insurance over time and across a broad base is often unstoppable
Drive awareness of the real cost of debt financing to current and
future residents and businesses
Encourage purchase of reinsurance by state insurance programs
Oppose broadening of the assessment base beyond property
insurance, which often disadvantages commercial policyholders
Advocate allocation formulae that are fair to commercial policyholders
55
Zurich works to reduce exposure
Over the last three years, Zurich has invested considerable efforts to
reduce its and its customers’ exposures to catastrophe related
assessmentsImplemented book management and reporting strategies to reduce
participation obligations
Commenced litigation challenging assessment computation methods
Developed proprietary assessment forecasting tools
56
With excellent outcomes
In 2008, the industry paid $430 million in Hurricane Ike assessments - but Zurich
paid nothing despite its position as the third largest commercial property insurer
in the state
Zurich has managed down its participation since 2005 in other state catastrophe
insurance facilities as well, such as:
Mississippi Windstorm Underwriting Association from 8% to 2.2%
North Carolina Commercial Beach Plan from 9% to 0.9%
Alabama Insurance Underwriting Association from 6.5% to 1.2%
57
Two Questions
58
Question #1 – RMC only
How do you rate your level of concern about assessment-backed
financing of natural catastrophe risks?
A.
B.
C.
D.
Significant
Moderate
Slight
Not at all
41.2%
47.1%
11.8%
A
B
C
D
59
Question #2 – RMC only
Do you agree with Zurich’s approach to minimize and manage the
impact of assessment-backed financing of natural catastrophe risks?
A.
Strongly agree
B.
Mostly agree
C.
Somewhat agree
D.
Disagree
55.6%
38.9%
5.6%
A
B
C
D
60
Customer Satisfaction &
Loyalty Research Study
Greg Maguire
Valerie Butt
Customer Satisfaction and Loyalty
Research Study
Independent research company, TNS, performed the survey work
Surveys conducted over 30-day period in July and early August
Surveys completed by 105 Relationship Customers and 80 Market
Customers
Approximately 65 questions/statements
Measurements in two components on a 5-point scale
– How valuable to you in selection of company
– Zurich’s performance against these attributes
Additionally – 4 key overarching benchmark questions
Produces a “Customer Retention Index”
62
TRI*M Index Questions
North American Industry Benchmarks
TNS recommends the North American corporate banking benchmark as the most appropriate
to use here (an insurance benchmark is currently being calculated for North America). The
corporate banking benchmark was calculated from interviews conducted exclusively in a B2B
environment.
75
Travel & Leisure
74
Manufacturing
77
Retail Banking
Corporate Banking *
72
Finance
72
* TRI*M Index Benchmark – North American Corporate Banking
(Calculated from 25,000 TRI*M interviews, 2005-2008)
63
The Zurich Customer Retention Index
Overall rating
How would you rate the overall performance, products and
services of Zurich?
Excellent, Very good, Good, Fair, Poor
Recommendation
Based on your experience, would you recommend Zurich to
colleagues or other companies?
Definitely, Probably, Fairly likely, Probably not, Definitely not
Repurchase
Based on your experience would you purchase the products
and services of Zurich again? Definitely, Probably, Fairly
likely, Probably not, Definitely not
Advantage versus
Competitors
Given what you know about other insurance providers, how
would you rate the advantage to your organisation of dealing
with Zurich rather than with any other provider?
A very big advantage, A big advantage, Some advantage,
Only a slight advantage, No advantage at all
64
Question – RMC only
Overall rating
How would you rate the overall performance,
products and services of Zurich?
A.
B.
C.
D.
E.
Excellent
Very good
Good
Fair
Poor
61.1%
33.3%
5.6%
A
B
C
D
E
65
Question - Zurich only
Overall rating
How would you rate the overall performance,
products and services of Zurich?
A.
B.
C.
D.
E.
Excellent
Very good
Good
Fair
Poor
70.0%
30.0%
A
B
C
D
E
66
Overall TRI*M Index Questions for
Relationship Customers
Zurich performs above the mean for each measure with recommendation doing particularly
well.
Overall Performance
Mean score
(on a scale of 1 to 5)
4.1
Overall Performance
Benchmark
3.8
Recommendation
4.5
Recommendation
Benchmark
3.9
Repurchase
4.5
Repurchase Benchmark
4.1
Competitive Advantage
Competitive Advantage
Benchmark
Zurich’s performance
3.5
3.3
Corporate banking benchmark
•TRI*M Typology Benchmark North American Corporate Banking (shown in grey)
Base 105
67
Question - RMC only
Recommendation
Based on your experience, would you recommend
Zurich to colleagues or other companies?
A.
B.
C.
D.
E.
Definitely
Probably
Fairly likely
Probably not
Definitely not
56.3%
31.3%
12.5%
A
B
C
D
E
68
Question - Zurich only
Recommendation
Based on your experience, would you recommend
Zurich to colleagues or other companies?
A.
B.
C.
D.
E.
Definitely
Probably
Fairly likely
Probably not
Definitely not
75.0%
25.0%
A
B
C
D
E
69
Overall TRI*M Index Questions for
Relationship Customers
Zurich performs above the mean for each measure with recommendation doing particularly
well.
Overall Performance
Mean score
(on a scale of 1 to 5)
4.1
Overall Performance
Benchmark
3.8
Recommendation
4.5
Recommendation
Benchmark
3.9
Repurchase
4.5
Repurchase Benchmark
4.1
Competitive Advantage
Competitive Advantage
Benchmark
Zurich’s performance
3.5
3.3
Corporate banking benchmark
•TRI*M Typology Benchmark North American Corporate Banking (shown in grey)
Base 105
70
Repurchase
Question - RMC only
Based on your experience would you purchase the
products and services of Zurich again?
A.
B.
C.
D.
E.
Definitely
Probably
Fairly likely
Probably not
Definitely not
55.6%
38.9%
5.6%
A
B
C
D
E
71
Question - Zurich only
Repurchase
Based on your experience would you purchase the
products and services of Zurich again?
A.
B.
C.
D.
E.
Definitely
Probably
Fairly likely
Probably not
Definitely not
54.5%
36.4%
9.1%
A
B
C
D
E
72
Overall TRI*M Index Questions for
Relationship Customers
Zurich performs above the mean for each measure with recommendation doing particularly
well.
Overall Performance
Mean score
(on a scale of 1 to 5)
4.1
Overall Performance
Benchmark
3.8
Recommendation
4.5
Recommendation
Benchmark
3.9
Repurchase
4.5
Repurchase Benchmark
4.1
Competitive Advantage
Competitive Advantage
Benchmark
Zurich’s performance
3.5
3.3
Corporate banking benchmark
•TRI*M Typology Benchmark North American Corporate Banking (shown in grey)
Base 105
73
Advantage versus
Competitors
Question - RMC only
Given what you know about other insurance providers,
how would you rate the advantage to your
organization of dealing with Zurich rather than with
any other provider?
A.
B.
C.
D.
E.
Very big advantage
Big advantage
Some advantage
Slight advantage
No advantage at all
52.9%
29.4%
11.8%
A
5.9%
B
C
D
E
74
Advantage versus
Competitors
Question - Zurich only
Given what you know about other insurance providers,
how would you rate the advantage to your
organization of dealing with Zurich rather than with
any other provider?
A.
B.
C.
D.
E.
Very big advantage
Big advantage
Some advantage
Slight advantage
No advantage at all
58.3%
16.7%
A
25.0%
B
C
D
E
75
Overall TRI*M Index Questions for
Relationship Customers
Zurich performs above the mean for each measure with recommendation doing particularly
well.
Overall Performance
Mean score
(on a scale of 1 to 5)
4.1
Overall Performance
Benchmark
3.8
Recommendation
4.5
Recommendation
Benchmark
3.9
Repurchase
4.5
Repurchase Benchmark
4.1
Competitive Advantage
Competitive Advantage
Benchmark
Zurich’s performance
3.5
3.3
Corporate banking benchmark
•TRI*M Typology Benchmark North American Corporate Banking (shown in grey)
Base 105
76
Very High Index score for
Relationship Customers
Zurich performing very strongly at an overall level in North America.
Relationship Customers
55
Low
Retention Bottom
10%
68
72
Bottom
33%
Mean
78
87
Top
33%
Top
10%
90
High
Retention
TRI*M Index Continuum – North American Corporate Banking
(Calculated from 25,000 TRI*M interviews, 2005-2008)
77
Customer Satisfaction and Loyalty
Research Study
Three other key areas measured
Overall Experience = 28 Attributes
– Index Score = 90
Claims Experience = 15 Attributes
– Index Score = 89
Working with Zurich or “The Transaction” = 11 Attributes
– Index Score = 90
78
Overall Experience – Relationship Customers
High
Positive picture for the hygiene factors with Zurich performing far above
average on being a ‘financially stable provider’.
The Hygienics
Hygienics
A03 Being a financially stable provider
A07 Access to underwriters
A22 Having Competitive premiums
A03
A22
Stated Importance
Low
TRI*M Index 90
A07
Potentials?
Low
Base 105
Performance
Far above average
Above average
Motivators
Average
Below average
Hidden Opportunities
Impact on Customer Retention
High
Far Below average
79
Overall Experience – Relationship Customers
High
Timeliness and softer measures around understanding the customer come
out as key themes; however Zurich performs at the average level at best on
these attributes.
The Motivators
A16
Low
TRI*M Index 90
A08
A10
Far above average
Above average
Average
A18
A19
Potentials
Low
Base 105
Performance
Motivators
Stated Importance
A08 Access to decision maker
A09 Speed of response to any queries
A10 Speed of decision making
A11 Quality and effectiveness of communication channels
A16 Accuracy of documentation provided
A17 Understanding what you need
A18 Understanding your business
A19 Understanding your company’s attitude to risk
and insurance
Hygienics
A17
A09
A11
Hidden Opportunities
Impact on Customer Retention
Below average
High
Far Below average
80
Overall Experience – Relationship Customers
A01 Clarity around how the relationship is managed
A02 Proactively offering new solutions and insights
A04 Flexibility and Clarity on Credit and Collateral
A15 Assisting you to manage the Cost of risk
A20 Making you feel valued as a Customer
A23 Offering innovative insurance solutions
A27 Effective Collaboration with brokers or agents
A28 Offering Risk Insights
Hygienics
Motivators
Stated Importance
The Hidden Opportunities
High
Below average performance on Hidden Opportunities could have a negative
impact on retention
A23 A01
A27
A02
A20
A15
A04
A28
Low
TRI*M Index 90
Low
Base 105
Performance
Potentials?
Far above average
Above average
Average
Hidden Opportunities
Impact on Customer Retention
Below average
High
Far Below average
81
Overall Experience – Relationship Customers
A05 Quality of risk management information systems
A06 Having a good image in the Corporate marketplace
A12 Having insurance offerings not available from Competitors
A13 Being recommended by a broker or agent
A14 Offering risk engineering services
A21 Offering a relationship manager
A25 Providing a wide range of products
A26 Offering a Co-ordinated service across the world
Hygienics
Stated Importance
High
The Potentials
Motivators
A21
A06
A26
A25
A12
Low
A05
TRI*M Index 90
Potentials?
Low
Base 105
Performance
Far above average
Above average
Average
A14
A13
Hidden Opportunities
Impact on Customer Retention
Below average
High
Far Below average
82
Working with Zurich – Relationship Customers
Low
B01 Pricing reflects our total volume of business with the
provider
B02 Timely provision of documentation
B03 Smooth transition from previous insurer
B04 Clarity on division of responsibility between broker and
insurer
B05 Clarity on who will be handling your organisation, such
as Client servicing team and Claims team
B06 Having access to knowledgeable underwriters
B07 Recommending solutions that fit my needs
B08 Clearly Communicating what information we need to
provide to obtain a quote
B09 Transparency of pricing
B10 Clarity of elements that make up the premium
B11 Being kept informed on progress
TRI*M Index 90
Hygienics
Far above average
Average
B09
B03
B01
Potentials?
Low
Above average
B08
B07
B02
B05
B11
B10
B04
Base 87
Performance
Motivators
B06
Stated Importance
Rated by those who’ve recently
bound or renewed business
High
Zurich’s performance is below average on elements which are quite important
to customers.
below average
Hidden Opportunities
Impact on Customer Retention
High
Far below average
83
Summary of strengths and weaknesses
Relationship Customers
Strengths to maintain
Access to Decision Maker
Clarity around how the relationship is managed
Being a financially stable company (taken for granted)
Speed of Decision Making (and queries/comms channels)
Weaknesses
Understanding what you need/Understanding your business
Keeping customers updated on claims progress/timely provision
of information
Accuracy of documentation provided
Assisting you to manage the cost of risk
Opportunities
Offering Risk Insights
Offering Innovative Insurance solutions
84
Customer Satisfaction and Loyalty
Research Study
Key Issues for RMC to Develop
Assisting you to manage the cost of risk
– Role of risk engineering
– Providing risk insights
What do these mean to you?
What are your expectations from Zurich?
What do we have to do to improve performance?
85
86
WINNERS!
1. Paula Gentile
2. Dan Baldwin
3. Heidrun Toben
4. Leslie Lamb
Visit your Zurich Virtual Concierge Often!
87
Global Life:
Corporate Life & Pensions
Sherif Zakhary
Head of Corporate Life &
Pensions
Question – RMC only
What is your level of involvement in the employee
benefit decision making?
A.
B.
C.
D.
Direct – Decision Making
Peripheral – On a Team/Committee
Minimal – General Awareness
Not at all
53.3%
26.7%
6.7%
A
13.3%
B
C
D
89
Who Are We?
Corporate Life & Pensions is part of the Zurich Financial Services
Group and brings together a wide range of corporate professionals
from Zurich’s businesses across the globe.
– Thanks to Zurich’s extensive international expertise and strong local
presence, the Corporate Life & Pensions team can work across
international boundaries to create and coordinate innovative
employee benefit solutions that deliver valuable efficiencies for your
business.
– We’re committed to the employee benefits market and are investing
to be a global leader in this field.
We believe in building long-term relationships and gaining an in-depth
understanding of your business so that we can aim to provide the best
possible solutions for your needs.
Our international presence and network delivers seamless integration
across borders.
We’re a leading global insurer with reassuring financial strength and
stability.
90
Innovative approach – innovative
solutions
As today’s business environment evolves towards a more internationally
mobile workforce, our responsive and coordinated approach focuses on
the corporate life and pensions needs of large multinational
organizations.
With extensive expertise in the international marketplace and a strong local
presence, Zurich is well placed to deliver innovative, globally coordinated
employee benefit packages.
These range from efficient, cost-effective domestic schemes to flexible and
portable expatriate solutions.
International corporations can look to Zurich for an extensive range of
propositions across the employee benefits market.
91
We Offer…
Pensions and saving
Administering and servicing corporate customers’ pension schemes
Pension annuities for retiring members
Technical advisory services
Investment management (Ireland only)
Life and disability
Payment of a lump sum or regular annuity in case of death of an employee
Payment of a lump sum or regular annuity in case of disability of an employee
Multinational group risk solutions (including risk pooling)
International solutions
International retirement benefits for expatriates and highly mobile workforces
International group protection for expatriates and highly mobile workforces
Accident & health
Payment of a lump sum or regular amount in case of an accident
Payment of a lump sum or a regular amount in case of defined health events
92
We are building a distinctive approach
to win in the corporate benefits arena
Proven
expertise in
group life and
pensions to be
expanded
cross-border
Global distribution
approach to target
international EBCs
International
propositions for
multinational
companies
Hub and spoke
operating model
to enter new
territories
efficiently
93
A global approach to proposition
management will make us more agile
and responsive
Our globally
integrated
proposition
management
function will
bring us…
Hub-based proposition
development
Single global prioritisation
process
• Increased agility
• Improved time to market
• Better responsiveness
Truly global propositions with
local customisation
94
Customer needs are becoming
increasingly similar globally, and
require ever-more similar solutions
Global trends
Growing population / middle classes with
private planning needs
Increasing pressure to ensure retirement
plans cope with longer lives
Decreasing state support for retirement
Growing demand for de-risking of
retirement plans
Similar global
demographic trends
Progressive economic
and financial
integration
Consequently,
customers’ needs are
converging
95
Zurich has a unique opportunity to be a
global winner in a market with no clear
dominant player
Domestic and local players
Internationally mobile providers
Multinational providers
Our
competitors
However, across the largest markets there is no clear
global market winner…
Our key competitors across the largest global markets :
Local Market
Leader
Market and
positioning
Not
present
US
UK
Not
present
Risk only
Not
present
Germany
Netherlands
Switzerland
Italy
Not
present
Not
present
Ranked 1 to 3
Ranked 3 to 15
Ranked > 15
In the
globalization
trend, the
absence of a
dominant global
player presents
an opportunity for
Zurich to claim
that space
Not
present
96
By adding global propositions to existing local
propositions we build a strong diversified
portfolio
Available now
I
UK
US
GER
Available in 2010
CH
IRL
MEX
Under discussion/not available
Chile
IT
ES
P
PT
AT
AUS
ZIS
Pension
Life
PROPOSITION
S
Disability
Accident
Risk pooling
Suppl. health
Investment in a Corporate Life & Pensions IT platform and operations hub to deliver crossborder propositions (evolution of Mercury)
Evolved Corporate Life & Pensions Target Operating Model to enable growth
- Product development process
- Customer and distributor information consolidation
- Planning and Performance Management framework
- Evaluation of go to market approach
- Harmonized and international approach to sales management
97
Overview of Captive Market
Increasingly, multinational companies are taking a more strategic approach to benefits
financing. The organizations are asking themselves, what risk exposure do we want?
How do we finance it most efficiently?
Use of captives for employee benefits is increasing and the advantages include:
– Cost Savings (accelerated cash flow, capture investment return, eliminated
risk charges, reduced expense, remove insurers’ profit loading, etc.)
– Improve claim cost management
– Increase control (custom designed coverage, ex gratia payments, data
warehousing, etc.)
– Spread of risk
Captives are used for a range of employee benefits
Highest
Defined benefit plans
Post-retirement medical
Savings
potential and
difficulty of
implementing
transaction
Non-qualified executive benefits
Short-term disability
Supplemental life
Active medical stop-loss
Long-term disability
Lowest
AD&D
Basic life
98
The Zurich Employee Benefit Captive
Proposition Story
Zurich’s will be a strong player in the captive marketplace – the
competition is unable to service appropriately.
Key success factors that Zurich must be committed to
accomplishing include:
– Degree of control over network participants – timely responses to
–
–
–
–
–
–
requests
Geographic & benefit coverage representation
Level of administrative expense/investment credits
Service quality (reporting quality, timeliness, flexibility)
Reinsurance capacity
Captive solutions
Development of strong EBC relationships (Towers Perrin, Watson
Wyatt, Aon Consulting, Spring Group, Mercer HR Consulting,)
99
Zurich North America
Risk Management Council Meeting –
Group Discussion
J.P. Fowler
Top ‘Pressing Risks’ facing Risk
Managers today
Please select the issue that you feel is the dominant challenge regarding
risk management in your organization today:
A.
B.
C.
D.
Increasing competition
Business Interruption
Regulatory / Legislative Changes
Economic Slowdown
© Zurich American Insurance Company
78.6%
14.3%
6/29/2009
A
7.1%
B
C
D
101
Organizational challenges that Risk
Managers face today
Please select the issue that you feel is the dominant challenge
regarding risk management in your organization today:
A. Insufficient enterprise-wide risk culture
B. Lack of alignment between the company’s strategies and it’s risk
appetite
C. Lack of integration & aggregation across all risk types
D. Inadequate availability of timely risk, finance & business data
© Zurich American Insurance Company
35.3%
35.3%
23.5%
5.9%
6/29/2009
A
B
C
D
102
Survey says….
© Zurich American Insurance Company
Aon’s 2009 Global Risk Management survey responses to “The 10
Most Pressing Risks” were:
1. Economic slowdown
2. Regulatory/legislative changes
3. Business interruption
4. Increasing competition
5. Commodity price risk
6. Damage to reputation
7. Cash flow/liquidity risk
8. Distribution or supply chain failure
9. Third-party liability
10. Failure to attract or retain top talent
Source: Aon’s 2009 Global Risk Management Survey
6/29/2009
103
Survey says…
Accenture’s 2009 Global Risk Management Survey Study – based on
260 CFO’s, Chief Risk Officer’s and other executives with Risk
Management Responsibilities
© Zurich American Insurance Company
A.Lack of alignment between the company’s strategies and it’s risk
appetite (85%)
B.Insufficient enterprise-wide risk culture (82%)
C. Inadequate availability of timely risk, finance & business data (80%)
D. Lack of integration & aggregation across all risk types (78%)
Source: Accenture 2009 Global Risk Management Survey
6/29/2009
104
What does the economic downturn
mean to how you are managing risk
and buying insurance today?
Summary of Issues
© Zurich American Insurance Company
1. Economic slowdown
2. Regulatory/legislative changes
3. Business interruption
4. Increasing competition
5. Commodity price risk
6. Damage to reputation
7. Cash flow/liquidity risk
8. Distribution or supply chain failure
9. Third-party liability
10. Failure to attract or retain top talent
6/29/2009
1. Lack of alignment between the
company’s strategies and it’s risk
appetite
2. Insufficient enterprise-wide risk
culture
3. Inadequate availability of timely risk,
finance & business data
4. Lack of integration & aggregation
across all risk types
106
The Global Economy
A step back from the abyss
Daniel M. Hofmann
Group Chief Economist
Zurich Financial Services
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
108
The US and Germany in the lead
Econom ic activity index for the United States,
the United Kingdom and Germ any
2
1
0
-1
-2
-3
Values below -1
denot e a recession
-4
-5
-6
1995
1997
1999
Unit ed St at es
2001
2003
2005
Unit ed Kingdom
2007
2009
Germany
Source: Zurich
109
No immediate setback in sight
Leading indicators for m ajor econom ies
6-mont h percent change (annualized)
20
10
0
-10
-20
-30
-40
2000
2001
2002
Euroland
2003
2004
UK
2005
US
2006
2007
China
2008
2009
Japan
Source: Thomson Datastream
110
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
111
Housing decline has run its course - 1
Group-specific Case-Shiller real price index
Index, Jan 1991 = 100
250
200
150
100
Long-run t rend in real
new home sales price
(1963 - 2008)
50
1991
1993
1995
Bubble cit ies
1997
1999
Super st ar cit ies
2001
2003
2005
Depressed cit ies
2007
2009
Ot hers
Source: Thomson Datastream, Zurich
112
Housing decline has run its course – 2
The most affordable since 1970
Inventory overhang is melting
Housing Affordability Index
700
14
600
12
500
10
400
8
300
6
200
4
100
2
160
140
120
100
80
60
40
1981
0
1980
1985
1989
1993
1997
2001
2005
2009
Rat io of houses f or sale t o houses sold
Number of housing unit s in t housands
180
0
1984 1988
1992 1996 2000
2004 2008
Total inventory of unsold new homes (LHS)
Months supply at current sales rate (RHS)
Source: Thomson Datastream, Census Bureau
113
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
114
Risk 1: Final demand will stay
depressed
Capacity utilization rate
Personal savings
90
10
9
85
8
6
5
4
in percent
as share of GDP
7
80
Long-run average
75
3
2
70
1
0
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
65
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
Source: Thomson Datastream
115
Risk 2: A credit-less recovery
Financial sector at best half-way through in dealing with toxic assets
Estim ated w ritedow ns
Actual w ritedow ns
(August 27, 2009)
3'000
3'000
GSE
Ot her
2'500
2'500
Banks
Banks
2'000
USD billions
USD billions
2'000
1'500
1'500
1'000
1'000
500
500
0
0
USA
Europe
Asia
USA
Europe
Asia
Source: Bloomberg
116
Risk 3: Reversal in global trade
JAP
TPE
IND
INA
PHI
CHN KOR
SIN
HKG
12'000
0
10'000
8'000
-20
6'000
4'000
Yr/yr change in %
-10
-30
2'000
0
01/04
-40
10/04
07/05
04/06
Exports yr/yr in %
01/07
10/07
07/08
04/09
Baltic exchange dry index
Source: Datastream
117
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
118
A long-term perspective on inflation
Annual inflation
in %; 11-yr MA
15
10
15
Napoleonic
Wars
US War of
Independence
WW I
WW II
10
US Civil War
5
5
0
0
Vietnam War;
oil price shock
-5
1st Industrial
Revolution
-10
1750
USA
1775
-5
2nd Industrial
Revolution
1800
Great Depression
Great Britain
1825
1850
1875
-10
1900
1925
1950
1975
2000
Source: Deutsche Bank
119
Soothing monetary signals
Grow th in credit and money
Central banks' total assets
350
40
6-m ont h percent change (annualized)
Index M ay 2007 = 100
300
250
200
150
100
50
0
01/2007
07/2007
Bank of England
01/2008
07/2008
01/2009
Federal Reserve Bank
07/2009
ECB
MZM
Commercial and
industrial loans
20
0
-20
1999
2001
2003
2005
2007
2009
Source: Thomson Datastream, Bloomberg
120
Government debt trends in advanced
economies are not sustainable
G-20 government debt
In advanced economies, a
critical debt level is 100% of
GDP. In 2014, the base
line scenario foresees for
the 100% stress level to be
surpassed by Belgium,
Greece, Ireland, Italy,
Japan and the US.
160
Advanced economies
stress scenario
140
Debt in % of GDP
120
Stress marker AE
100
Advanced economies
base line
80
Stress marker EM
60
Emerging economies
stress scenario
Emerging
economies base line
40
20
00
02
04
06
08
10
12
Debt tolerance is lower in
emerging countries, but
India and Hungary are the
only two countries exceeding the lower EM stress
level of 60% of GDP.
14
Source: IMF
121
Markets take a sanguine view
M arket-based inflation expectations
5-year breakeven rates
4
missing dat a
3
Inflation in %
Back to
normal
2
1
Deflation scare
0
-1
-2
01/05
07/05
01/06
07/06
Unit ed St at es
01/07
07/07
01/08
Unit ed Kingdom
07/08
01/09
07/09
Euroland
Source: Bloomberg
122
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
123
The beginning of normalization
US financial stress index
Novem ber 19:
Fear of huge
credit card debt s
Week of August 21, 2009
Standard deviations from mean
6
M arch 6:
Renew ed concerns
about banks' healt h
October 8:
Global slump of
equit y market s
5
4
July 13:
Ext ensive f inancial aid f or
Fannie Mae and Freddie Mac
3
M arch 17:
Collapse of
Bear St earns
2
Septem ber:
Collapse of Lehman
and AIG
1
0
-1
-2
01/07
05/07
09/07
01/08
05/08
09/08
01/09
05/09
Source: Thomson Datastream, Zurich
124
Rapid adjustment in the stock market
Unlikely to be another Great Depression
Equity m arket perform ance
during previous financial crises
250
Index = 100 at m arket peak
Japan crisis ----------- Jan 03, 1990
Sw eden crisis -------- Jul 04, 1990
Great Depression -- Sep 16, 1929
Subprime crisis ----- Oct 10, 2007
200
150
100
50
0
0
250
500
750
1'000
1'250
1'500
Days since market peak
Japan crisis (Topix)
Great Depression (S&P 500)
Subprime crisis (S&P 500)
Sweden crisis (OM X)
Source: Thomson Datastream, Zurich
125
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers and Zurich
7
Appendix
126
Insurance capacity is shrinking fast
and rates are inevitably rising
US policyholder surplus
Reversal in rate changes
US commercial business; average all lines
USD billions
21%
530
2009 expectations:
Δ in %
- Commercial property, non CAT
- Commercial property, CAT
- Energy, Gulf of Mexico
- Energy, other
- Marine hull
- Airline
0-10
10-25
50-100
10
5
5
18%
15%
510
12%
490
-16.2%
470
9%
6%
Source: Merryll Lynch
3%
450
0%
430
-3%
410
-6%
-9%
390
Katrina
Rita
Wilma
-12%
370
2007
Source: ISO / Zurich
2008
2009
-15%
2002
2003
2004
2005
2006
2007
2008
2009
Source: CIAB
127
Zurich rate Change Monitor1
for personal and commercial lines
Half year 2009
Q1 2009
GC
NAC
EGI
Int’l
Markets
Farmers
Exchanges2
GC
NAC
EGI
Int’l
Markets
Farmers
Exchanges2
Personal
Lines
n/a
n/a
2%
3%
4%
n/a
n/a
1%
3%
3%
Commercial
Lines
5%
3%
2%
5%
2%
3%
2%
2%
3%
1%
EGI by country
SwitzerUK Germany land Italy
EGI by country
Spain
Rest of
EGI
SwitzerUK Germany land Italy
Spain
Rest of
EGI
Personal Lines
11%
1%
-1%
3%
3%
1%
10%
2%
-1%
1%
2%
1%
Commercial
Lines
2%
2%
0%
3%
7%
4%
2%
3%
-1%
1%
6%
4%
1
The Zurich Rate Change Monitor expresses the Gross Written Premium development due to premium rate change as a percentage of the renewed portfolio against a
comparable prior period. In this slide, the shown periods 2009 are compared to the same periods 2008.
2
Zurich Financial Services Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides
management services to the Farmers Exchanges and receives fees for its services.
128
Manufacturing and retail sectors are
perceived weaker than financials
5-yr CDS US indust ry spreads
3'500
Credit Default Swaps (CDS)
transfer third party credit risk from
one party to another in exchange
of regular payments, essentially
premiums
10'000
Travel
9'000
Const ruct ion
Ret ail
8'000
Banks
2'500
Goods & Services
7'000
Chemical
Insurance
2'000
6'000
Aut o (RHS)
5'000
1'500
4'000
3'000
1'000
2'000
500
Aut o
in basis point s; all series but Aut o
3'000
If the third party defaults, the
“insurer” will pay the “insured” the
outstanding principal and the
remaining interest on the debt
Credit default swaps are a
market-based proxy for the
evaluation of a company’s
financial strength
1'000
0
03/08
0
06/08
09/08
12/08
03/09
06/09
Source: Thomson Datastream
129
The CDS market perceives European
insurers financially stronger than US carriers
Risk prem ia f or large insurers
CDS spreads in basis point s; last day: August 26, 2009
Index of CDS spreads (basis point s)
1'000
European insurers have performed
better in the CDS market than their
US peers
800
The up-tick observed in early 2009
was mainly due to concerns about
the financial strength of European
life insurers
600
400
200
0
01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09
European insurers
US insurers
Source: Thomson Datastream / Zurich
130
Clear market segmentation
5-year CDS spreads
Average of spreads bet w een Jul 27 and Aug 26, 2009
RSA
Chubb
Generali
Allianz
AXA
Travelers
Zurich
Ace
ING
Sw iss Re
Aviva
XL
AIG
I
II
III
1' 193 IV
0
50
100
150
200
250
300
350
400
450
500
in basis point s
Source: Thomson Datastream / Zurich
131
Zurich’s profitability and shareholders’ equity
Shareholders' equity
Business Operating Profit
2,000
30,000
1,800
25,000
1,400
i n USD m i l l i ons
i n USD m i l l i ons
1,600
1,200
1,000
800
600
400
20,000
15,000
10,000
5,000
200
0
0
Q1/08
Q2/08
Q3/08
Q4/08
Q1/09
Q2/09
2004
2005
2006
2007
2008
HY 2009
Development of 2008 shareholder’s equity, main
components:
Unrealized losses on investments, USD 3.2 billion
Foreign exchange translation effects, USD 2.7 billion
Dividend and share buy-back, USD 2.4 billion
Actuarial losses on pension plan, 1.4 billion
132
Our investment strategy contributes
to our financial strength
Asset allocation in % of USD 179.6 billion of
Group investments
Hedge Funds /
Private Equity
Real Estate
Equities
6.2
Cash,
Short term
•
•
Zurich manages assets to liabilities
•
In 2008, this resulted in a total net
investment return of 1%, including
USD 3.9 billion of changes in
unrealized losses
•
An excellent result in the worst
financial markets since 1931
The investment portfolio balances
risk and return
2.3
3.3
7.0
Fixed income
81.2
133
We are disciplined in capital and
risk management
Total allocated capital = USD 28bn RBC plus USD 2bn direct
allocation to Farmers Management Services
Natural
Catastrophe
risk
Life insurance
risk
Reinsurance
credit risk
Investment credit risk
Market / Asset
& Liability
Management
risk
3%
10%
Our core business is insurance, not asset management or financial products
•
More than 60% of our capital
is allocated to insurance
24%
1%
4%
41%
Premium &
Reserving risk
•
8%
Business risk
9%
Operational risk
134
Agenda
1
Where are we?
2
Housing at a turning point
3
Risks
4
Is inflation an issue?
5
Impact on financial markets
6
Implications for insurers
7
Appendix
135
Appendix 1
Real GDP forecast 2009 - 2011
2009
2010
2011
United States
-2.6
0.8
2.1
Euro area
- Germany
- Italy
- Spain
-4.8
-6.2
-5.1
-4.0
-0.3
-0.6
-0.1
-0.8
1.5
1.5
0.7
0.9
United Kingdom
-4.2
0.2
2.4
Switzerland
-3.0
0.1
1.6
Japan
-6.0
1.7
1.5
Source: IMF
136
Appendix 2
CPI inflation forecast 2009 - 2011
2009
2010
2011
United States
-0.7
1.7
2.8
Euro area
- Germany
- Italy
- Spain
0.4
0.1
0.8
-0.1
0.6
0.5
1.3
1.3
1.8
1.6
2.0
1.8
United Kingdom
1.7
0.7
1.5
Switzerland
-0.3
1.1
1.3
Japan
-1.0
-0.6
1.0
Source: IMF
137
Policy Delivery Commitment
Lisa Jablonski
Chief Administrative Officer
Global Corporate, North America
Our customers have requested timely delivery
of policy contracts and Zurich is committed to
meet this expectation.
Previous customer council feedback has included a request for policies
within 30 days of the effective date.
The focus of a recent RIMS convention was on timely policy delivery.
The State of New York issued a circular requiring all insurers to mail
policies to the broker (or customer if direct) within 30 days of the
effective date. This requirement is effective next month.
139
We now track our mailing days and
capture reasons for delays to improve
our processes
Key reasons for delays include:
Manuscript wording – scripted and approved by all parties
Underlying primary policies are not received timely – these are required
to issue excess policies
Program option is not decided at binding
Exposure and other information required to issue policies is not provided
at binding.
Our results are improving but we need help from you and the brokers to
achieve our desired goal of 90% of policies mailed to the broker within 30
days of the effective date.
140
Discussion points
Have you heard of NY’s contract certainty requirement?
– What communications have you received from your brokers on this
topic?
Does any particular insurer routinely mail policies promptly after
binding? What is the reason for this success?
What does contract certainty mean to you? Are there key focus areas
where you need our attention?
Would you like additional information on this subject?
141
Claims Trends &
Developments
Chris Barnes
Chief Claims Officer
Global Corporate
Claim Trends and Developments
Property Trends
Wind Damage
Combustible Dust
Liability Trends and Developments
Imported Products Liability
Fraud Trends
Other Topics of Interest
143
Zurich Pop Quiz – RMC Only
The leading cause of property damage is:
A. Liquid damage
B. Fire
C. Wind
D. Dust explosion
30.0%
30.0%
35.0%
5.0%
A
B
C
D
144
Property losses
The traditional approach to property conservation has been to
protect against fire incidents
Zurich data over the past 6 years shows that damage from
windstorm exceeds that from fire – 37% of all property loss dollars
are windstorm related versus 22% of all property losses for fire
For our large Corporate Customers, the picture is more dramatic:
– Wind (hurricane) 46%
– Fire
20%
– Liquid damage 4%
– Dust explosion 4%
145
Wind Damage Trends
In 2005, Hurricanes Katrina, Rita and Wilma generated a record 25,000
Zurich claims, at 40,000 locations in 2005.
Katrina alone caused over $81 Billion in damage.
2008 was the most active wind year since the 2004 and 2005 hurricane
seasons.
1691 reported tornados per NOAA
Two Tropical storms and 3 Hurricanes
– FAY, HANNA, DOLLY, GUSTAV AND IKE
– Total Claim Count
- Over 7500
146
Zurich HelpPoint
Wind Damage
With Hurricane Katrina, Zurich launched its Alternative Dispute
Resolution program.
Zurich also initiated its WIN program, now called the Zurich Catastrophe
Action Team (ZCAT.
Zurich catastrophe claims response efforts earned honors from Texas
distributors for its work after Ike in 2008.
147
Combustible Dust Trends
Combustible Dust Trends Since 1980
Less frequent high severity claims
Over 130 killed and 780 injured (OSHA)
Billions in property damage and business interruption
Significant Events (1995 – Present)
1995 Textile Mill – Nylon Fiber
1999 Foundry – Phenolic Resin Dust
1999 Power Generator – Coal Dust
2002 Rubber Recycling – Rubber Dust
2003 Pharmaceutical – Plastic Dust
2003 Acoustic products–Plastic Resin Dust
2003 Auto parts – Aluminum Dust
2008 Sugar Mill – Sugar Dust
Plastic Dust Explosion
Photo: Chemical Safety Board
148
Industries involved
Food Products
Lumber Wood Products
Chemical Manufacturing
Primary Metals
Plastic & Rubber
Electric Services
Fabricated Metals
Equipment Manufacturing
Furniture & Fixtures
Other
7%
24%
15%
12%
8%
8%
8%
7%
7%
4%
Sugar Dust Explosion
Photo: Chemical Safety Board
Source: OSHA
149
Zurich HelpPoint
Combustible Dust
Education Spotlight:
The Fugitive Dust Hazard
Methods to reduce/prevent explosion:
HOUSEKEEPING can not be emphasized enough – keep dust to a
minimum
Periodic inspections focusing on dust accumulations on equipment, in
equipment and building structures
.
Zurich Risk Engineering can Help:
Onsite process/hazard reviews
Analyze protection devices
Facilitate testing dust samples
Assist with change management
Provide education and training
Photo: Zurich
150
Pop Quiz
If your company uses foreign manufacturers for part or all of your
product production, you can avoid or limit downstream liability by:
A. Ensuring the foreign manufacturer has insurance cover with an A rated global
insurer.
B. Require specific coverage limits with expenses outside of the limits.
C. No specific precautions are needed other than obtaining adequate insurance
coverage.
D. A and B.
151
Liability Trends
Imported Product Exposures
Global economy driving continued growth in imports of
products and components
Products manufactured in foreign countries create
unforeseen financial risks.
Prohibitive costs to pursue subrogation claims in foreign
jurisdictions
Poor documentation of contractual risk transfer, inadequate
specified levels of coverage, and/or lack of diligence relative to
obtaining Additional Insured status
Bankruptcies shift the exposure related to defective products to
the downstream distributors or retailers
152
Zurich HelpPoint
Imported Products Liability
Strategies to avoid or limit exposure:
Insurance Requirements:
Appropriate coverage limits and your company as an additional insured.
Coverage - primary, non-concurrent, or contributory
Expenses should not erode the policy limits.
Type of coverage desired - Occurrence preferred to Claims Made
Define choice of venue and law most favorable to you
Define traditional words.
153
Zurich HelpPoint
Imported Products Liability
Strategies to avoid or limit exposure:
Developing an effective "imported products" strategy
Assess supply chain risks and selection of foreign suppliers
Arrange on-site sampling
Consult legal counsel in jurisdiction to handle contract
negotiations
Establish clear product specifications for procurement
Implement a quality assurance strategy
Guard against quality slippage in subsequent price negotiation
Develop a product recall and communication program for brand
protection
154
Pop Quiz
The incidence of fraudulent claims:
A.
B.
C.
D.
E.
Has increased with the poor economy
The greatest increase has been in staged slip and falls
The greatest increase has been in staged accidents
A and B
A and C
50.0%
42.9%
7.1%
A
B
C
D
E
155
Fraud Trends
Poor economy is fostering more insurance fraud.
Zurich claims fraud referral rate to SIU has increased by 22%.
Staged accidents have increased 34%.
Slip and fall claims are up 77%.
Customers with premises liability exposures are at greatest risk.
This year alone, Zurich has uncovered at least two large,
sophisticated fraud rings that focused on “big box” stores and
involved staged accidents, individuals with multiple alias and
manufactured medical bills.
156
Zurich HelpPoint
Fraud Detection
Zurich SIU team helped federal postal inspectors unravel a scheme
involving 33 individuals who filed at least 60 claims with 16 insurance
companies, including Zurich.
Zurich has provided customer training on slip and fall management and
fraud detection.
Zurich has a cross functional team of claims, risk engineering and fraud
specialists working together to help customers prevent fraud.
157
Other Points of Customer Interest
Managing Loss Costs
Managing the costs of risks is a key issue for our large corporate
customers
Improvements in loss costs go directly to our customers bottom line
Zurich Best Practices, Continuous Improvement and Audit process
drives loss costs reductions.
Some recent examples, where we evaluated prospective customer’s
claim files and current loss costs, predicted at least a ten percent
performance improvement on the customer’s book by applying Zurich
Best Practices and delivered above predicted performance.
158
Zurich dramatically improved WC results for large
bundled customer
Prior Year
Expected
Actual
Incurred Loss ($000)
30000
25000
20000
15000
Actual about 20% below Prior Year
10000
5000
0
1
3
5
7
9
11
13
15
17
19
21
Months from Inception
159
Zurich similarly improved WC results for new
customer
Expected
Exp w/Exp Chg
Actual
Incurred Loss ($000)
12000
10000
8000
6000
Actual incurred running 25%
below exposure adjusted
projection
4000
2000
0
1
2
3
4
5
Months from Inception
9/1/2009
Risk engineering role protecting the bottom line
160
Other Points of Customer Interests
North America Customer Survey
Seventh consecutive with a
satisfaction score above 90%
Key Performance Driver Ratings
Total Satisfaction 88% in Q1 09
Timeliness = 90%
Responsiveness = 89%
Professionalism = 94%
Return Calls = 88%
Understand the Customer’s
Business = 91%
Assigned Staff = 95%
Satisfaction with Claims Protocol
Compliance = 95%
Global Corporate
Q2 08
Q4 08
Q1 09
Respondents
394
437
511
Top 2 Box
91%
91%
88%
Highly Satisfied
43%
40%
43%
Satisfied
48%
50%
45%
Somewhat Satisfied
6%
7%
9%
Somewhat Dissatisfied
2%
1%
2%
Dissatisfied
1%
1%
1%
Very Dissatisfied
1%
1%
0%
161
Supply Chain Insurance
protecting profitability if the chain breaks
Joe Tocco
EVP, Property
Global Corporate, North America
Supply Chain “Health Indicator” Survey
1.
2.
3.
4.
5.
6.
7.
© Zurich American Insurance Company
8.
9.
Do you know who your critical suppliers are and how much their failure would impact your
company’s profits?
Have you fully mapped your critical supply chains downstream to the raw material level
and upstream to the customer level?
Have you integrated risk management processes into your supply chain management
approaches?
Do you have routine timely systems for measuring the financial stability of critical
suppliers?
Do you understand your tier 1 production facilities and logistic hub exposures to natural
catastrophes?
Is supply chain risk management integrated into your enterprise risk management
approach?
DO you record the details of supply chain incidents and the actions you have put in place
to avoid future incidents?
Do your tier 1 suppliers have business continuity plans that have been tested in terms of
their viability?
Have you provided risk training to your supply chain management team?
1.
YES / NO
2.
YES / NO
3.
YES / NO
4.
YES / NO
5.
YES / NO
6.
YES / NO
7.
YES / NO
8.
YES / NO
9.
YES / NO
10. Is risk on the agenda at performance meetings with your strategic suppliers?
10. YES / NO
163
Supply Chain “Health Indicator”
Survey Results
How many “YES” answers did you score?
A.
B.
C.
D.
8 – 10
5–7
3–4
0-2
© Zurich American Insurance Company
61.5%
7.7%
A
B
15.4%
15.4%
C
D
E
164
Risk Assessment
Identify risks and exposures associated with key supplies/suppliers/
management controls
Conduct assessment through a series of interviews and workshops
involving managers with a role (direct or indirect) in supply chain risk
management, e.g. procurement, logistics, product development,
commercial/contracts, security, finance, IT systems, business continuity,
risk management
Evaluate scenario-based (EML/PML) financial impact of disruption
© Zurich American Insurance Company
helps customer define limits
forms basis of LCF
Generic Supply Profile examine external exposures related to the
identified supplies
Overall time required for assessment of this type will depend on
information available, number of suppliers, complexity and commitment
165
Supply Chain Insurance
Cover
A total or partial Reduction in Supply
which leads to a reduction in Output to the Business
All Risks cover
 Not restricted to property damage
 Focuses on incidents outside the insured’s control
Named supplies and suppliers
 Typically your key suppliers and supplies, a limited number
© Zurich American Insurance Company
Few exclusions
 Deliberate acts, quality of supply, product recall, fraud, war, terrorism,
infectious disease
166
Triggers that generally would be covered
© Zurich American Insurance Company











Proposed Triggers / Events
Supplier insolvency
Failure of utilities, communications systems or fuel supplies
Transport failures
Problems obtaining raw materials or components (including problems
with supplier’s suppliers)
Supplier staff illness (excluding pandemics) or strikes
Cyber risks, virus etc at the supplier
Restriction / denial of access to supplier’s premises
Physical damage (if not already covered under the main BI policy)
Delays in supply
Additional costs of sourcing alternative supplies
Political risks
167
Closing Remarks
Very positive customer reaction- 6 customers in risk assessment and promising
discussions with around 100 customers in total
SCI responds to a problem they face, particularly in current economy
Risk management/supply chain professional community new hot topic
© Zurich American Insurance Company
Zurich, as a member of the Supply Chain Risk Leadership Council, is working to
create the ISO standard on best practice in supply chain risk management,
including risk assessment and business continuity concerns
Supply chain risk assessment mitigation consulting now underway globally
Plan to launch Supply Chain Insurance product in North America by year end
168
International Strategy & Global
Network
Paul Horgan
Chief Underwriting Officer
Global Corporate, North America
Zurich’s Multinational Value Proposition
Zurich’s Global Network is represented in over 189 countries.
– 51 Owned
– 8 Direct Partners
– 130 Indirect Partners
Each Country utilizes state of the industry tools to bring Zurich
Multinational Insurance Proposition to bear in the design of a
comprehensive and compliant insurance program such as:
– Multinational Insurance Application – contains the most up to date
–
–
critical Regulatory information for over 200 countries.
Current International Premium Tax data ensuring that local tax
transparency requirement are met.
Detailed information outlining compulsory coverages and limits in
each country.
170
Zurich’s Multinational Value Proposition
Claims Data is captured through Zurich’s International Program
System (IPS). Flexible system for tracking and managing claims
Premium payment management. All Zurich owned and Direct
Partner companies use IPS as their baseline system. Once the
funds are received and entered into IPS those funds are ready to
move. Local premium movements are in hours or days rather than
weeks.
Dedicated staff of Multinational expert specializing in multi national
program administration.
171
Zurich’s Multinational Value Proposition
Our goal is to significantly grow this segment of our portfolio
What do you see as greatest need as a customer to delivering an effective
multinational program. What is most important to you?
What do you expect/require from your fronting carrier?
Based on your experiences or perceptions of Zurich's capabilities, what do
you see as areas we need to improve/develop to reach our objective?
172
Wrap-up: Day 1
Mike Kerner
CEO
Global Corporate in North
America
Zurich North America
Risk Management Council Meeting
Thursday
Sept. 10, 2009
Welcome: Day 2
Greg Maguire
EVP
Customer & Distribution Mgmt
Meeting Agenda
Thursday, Sept 10
Time
Description
Speaker
8:00 am
Welcome – DAY 2
G. Maguire
Summary of Day 1
8:15 am
Risk Manager only session
9:30 am
BREAK
9:45 am
Q&A / Open Forum – feedback from RM
only session
11:15 am
Closing Remarks
M. Kerner
Box Lunches
Departures
5:45 pm
Group dinner
Meet in hotel lobby
176
Assisting you to manage
the cost of risk
-Role of risk engineering
-Providing risk insights
RISK MGR’S
ONLY SESSION
What do these mean to
you?
What are your expectations
from Zurich?
What do we have to do to
improve performance
OTHER:
Regulatory
Issues/Comms
CYPRESS ROOM
Zurich’s Multinational Value Proposition
Our goal is to significantly grow this segment of our portfolio
What do you see as greatest need as a customer to delivering an effective
multinational program. What is most important to you?
What do you expect/require from your fronting carrier?
Based on your experiences or perceptions of Zurich's capabilities, what do
you see as areas we need to improve/develop to reach our objective?
178
Group
Discussion
Feedback from RM session
Q&A
Open Forum
2010 RMC Meetings
Feb/March (Virtual)
Sept 7-11 (Lucerne)
9:45 A.M.
Survey & Closing Remarks
Mike Kerner
CEO
Global Corporate in North
America
Question
How would you rate the overall content of the meeting?
A.
B.
C.
D.
Excellent
Above average
Average
Below average
58.3%
25.0%
A
16.7%
B
C
D
181
Question
Did the meeting address some of the key business
issues on your mind?
A.
B.
C.
D.
Most of them
Some of them
A few
None
84.6%
15.4%
A
B
C
D
182
Question
Do you feel that the Zurich speakers demonstrated
openness and transparency?
A.
B.
C.
D.
Definitely
Mostly
Somewhat
Not really
76.9%
23.1%
A
B
C
D
183
Question
Do you feel that this meeting was worth your time?
A.
B.
C.
D.
Definitely
Mostly
Somewhat
Not really
84.6%
15.4%
A
B
C
D
184
Question
Do you feel you learned something that will be of value
to you in your role as a risk manager?
A.
B.
C.
D.
Definitely
Possibly
Probably not
Not sure
84.6%
15.4%
A
B
C
D
185
Question
Would you recommend participation in Zurich’s Risk
Management Council to a colleague?
A.
B.
C.
D.
Definitely
Probably
Maybe
Not likely
92.3%
A
7.7%
B
C
D
186
Thank you
2010 Meetings:
DINNER
Feb/TONIGHT:
- Virtual
Sept - Lucerne
Please meet in the
hotel lobby at 5:45 pm
(Hurely’s Restaurant)