Zurich Insurance Group Ltd

Ladies and gentlemen, welcome to the Zurich Insurance Group Annual Results 2022 Conference Call. I am George, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star N1 on your telephone. For operator assistance, please press star N0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. John Hawking, Head of Investor Relations and Rating Agency Management. Please go ahead.

Thank you. Good afternoon, everybody, and welcome to Zurich Insurance Group's full year 2022 results Q&A call. On the call today is our group CEO, Mario Greco, my group CFO, George Quinn. Before I hand over to Mario for some introductory remarks, just as a reminder for the Q&A, we kindly ask you to keep it to two questions each. Mario.

Thank you. Thank you, John. So good afternoon, everybody, and many thanks for joining us today. Before George and I start answering your question, please allow me to give you a few remarks on this year's results. This morning, we reported our highest business operating profit since 2007, and also that we exceeded all our financial targets for the second consecutive three-year period. This is despite several tough years. where we have had to deal with many unexpected challenges. We remain agile, we focus on our goals, we continue to execute against our consistent strategy to transform Zurich into a simpler, into a more innovative, into a customer-centric organization. I'd like to thank all of my colleagues, our customers, our partners for this remarkable achievement. We ended the most recent cycle with the BOPAT ROE at 15.7%. That indicates the strength of the underlying business performance improvement and significantly exceeds our target of greater than 14. The combination of robust profitability, strength of capital position, and predictability of cash remittances allowed the Board to recommend a 9% increase in the dividend to 24 Swiss francs. which will correspond to a compound annual growth rate in the dividend of 6% over the most recent three-year cycle. In US dollar terms, the compound annual dividend growth will be 8%. As we set out back in November, we will continue to focus on customer needs, transforming Zurich into a leaner and more agile insurer that's primed for the future. Results continue to be seen in our growing customers' number and loyalty, with more than 2.1 million net new customers added during 2022, and an increased retention rate of 82%. Now, let me turn quickly to our business segments and start, as usual, with the property and casualty. Property and casualty today reports an excellent combined ratio at 94.3 and record premium levels. Gross return premiums grew by 14% on a like-for-like basis, with a strong growth achieved in both commercial insurance and retail business. Lower catastrophic losses and the benefits of earned rate in commercial were offset by the impact of inflation in retail motor and business makes shift towards crop in commercial. While we expect the rate increases in commercial insurance to moderate from the 8% seen in 2022, we expect to see further margin expansion in 2023. In retail and SME, given the rate increases that we have already actioned in 2023, we should see results starting to improve. In key European retail markets, like Switzerland and Germany, where January renewals are important, we are seeing encouraging signs. Life. 2022 was another year of significant progress for our life business. we achieved the highest profit ever despite unfavorable currency movements due to the US dollar depreciation and announced a complete sale of the Italy Life Back Book, which boosted the SST ratio by nine points in the fourth quarter. We also announced the sale of the Life Back Book in Germany. That is on track to be completed in the second half of this year. Together, these transactions further reduce balance sheet volatility, and enhance our already industry-leading capital light business model. We remain focused on profitable growth in our target segments of protection and unit linked, with 2023 bringing new distribution opportunities in both Italy and Germany, markets where we remain committed despite our portfolio optimization activities. Farmers now. 2022 was a strong year for farmers, against a challenging backdrop for U.S. personal lines insurance. Gross return premiums at the farmer exchanges increased by 9%, driven by the inclusion of the MetLife business for the full year and accelerating levels of rates across lines of businesses. Overall, the farmer's segment BOP increased by 18% over the prior year period, also helped by lower COVID claims in the life unit. Given the challenging market environment, the farmer's team, led by the new CEO Raul Vargas, are laser-focused on improving the underwriting performance of the exchanges, which in turn will help rebuild the surplus. As you will have also seen this morning, in order to support the exchanges effective December 31st, 2022, Farmers' Re has tactically increased its participation in the Farmers' Exchanges All Lines Quota Share Treaty. Sustainability. Now, sustainability continues to be a key focus for Zurich, and we look forward to discussing our initiatives with you in more detail at our dedicated ESG at Zurich webcast, which will be held on the 30th of March. Looking into the future, finally, we remain absolutely committed to deliver the strategic ambition and the financial targets that we set out in Zurich back in November for the next three-year cycle. The new plan looks for us to grow EPS at a compound rate of 8% to 2025. while further increasing the BOPAT ROE in excess of 20%. We also expect to achieve a further step up in cash remittances. The package as a whole should allow us to reward shareholders with continued attractive growth in our dividend. Thank you very much for listening, and George and I are now ready to take all your questions.