Zurich Insurance Group Ltd

Ladies and gentlemen, welcome to Zurich Update for the 9 months and its September 30, 2025 conference call. I am Valentina, the Chorus 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 Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mitchell Todd, Head of Investor Relations and Rating Agency Manager. Please go ahead, sir.

Good afternoon, everybody. A warm welcome to Zurich Insurance Group's third quarter 2025 results Q&A call. On the call today is our Group CEO, Mario Greco, and our Group CFO, Claudia Cordero-Leite. Before I hand over to Claudia for some introductory remarks, just a usual reminder, please, for Q&A, we kindly ask you to keep to a maximum of two questions. Claudia, what would you do?

Thank you, Mitch. Good afternoon, good morning, everyone, and welcome. Thank you for joining us today. I'm here with our good CEO, Mario Greco. Before we take your questions, I'd like to share a few reflections on our results for the first nine months of 2025. Zurich has delivered another outstanding performance, with strong group-wide revenue momentum at excellent levels of profitability and returns. Our resolute focus on execution, coupled with a uniquely diversified business model, contributes to the long-term delivery of shareholders' returns in the top quintile of the broader industry. There are three important aspects of the results that I would like to share with you. Property and casualty achieved record gross return premiums of 38.9 billion, up 8% year-on-year, with all regions contributing positively. Retail delivered exceptional growth with gross return premium up 16% year-on-year and 7% on a like-for-like basis. A strong environment for rates is complementing the management actions that we are undertaking to sustainably elevate profitability. Greater sophistication on pricing, customer segmentation, and claims management are all combining to enhance our retail margins. This is an area that we will explore more at our upcoming investor day. However, we observe already profitability progressing strongly with a combined ratio improving approximately two points year over year. Our motor book continues on an improving path, with a combined ratio better by almost five points year on year. Similarly, our broader German retail business recorded a combined ratio decrease of more than 11 points. Our commercial insurance business continues to grow profitably. Supported by superior risk selection, our focus on global specialties and middle market units, as well as the benefits from portfolio management actions taken over prior quarters. Specifically, with respect to specialty middle market, we have invested over a multi-year period in those two key strategic priorities. An important pillar is the targeted recruitment of underwriting talent widely across our business. In the U.S. alone, we have hired more than 100 middle market and specialty underwriting professionals, all operating out of an expensive network. of more than 30 locations. The underlying strength of our middle market business has also set ongoing actions to prune parts of our U.S. program business which didn't meet our strict underwriting standards. It is important to recognize the truly global complexion of these businesses. For example, our middle market footprint at the nine-month stage is 40% international. in terms of gross rate and premium. And here we are earning positive rate across the portfolio. In EMEA specifically, revenue grew at low double digit percentage rate in the first nine months of the year. To capture the full market potential of specialty lines, we are establishing a dedicated global specialty unit. This team will operate out of London and integrate and leverage our global capabilities to drive expansion of our approximately $9 billion portfolio of diversified exposure. We believe the high barriers to entry and prerequisite risk expertise in these business areas will drive attractive long-term earnings growth and shareholder returns. We look forward to presenting you with an opportunity to meet our leadership teams from both specialty and middle market at our upcoming investor day. Across our broader commercial P&C business, we still observe stability on industry terms and conditions and ongoing opportunities for capital deployment to attractive margins and returns. Aggregate commercial rates remain in positive territory. North America, our largest region, grew rates by 2% and EMEA at minus 0.8%. Thanks to our targeted growth strategy and a proactive portfolio management in areas such as U.S. programs and crop, we have driven sequential improvement in the combined ratio from the half year to the third quarter while growing our business. We benefited from a lighter natural catastrophe experience during 2025 versus our expectations of a normalized annual cost load of 2.5 to 3% range. Set against the devastation recently observed from Hurricane Melissa, it is a timely reminder of the elevated climate risk and wide protection gap affecting many global communities. With this climate risk profile in mind, we have structurally reduced our U.S. hurricane average annual loss exposure by 25% over the past four years, contributing to our strong performance on U.S. hurricane loss experience. Turning to farmers' exchanges, we see further evidence of a meaningful transformation. Growth-shifting premiums advanced 5% to $22.6 billion. I want to draw particular attention to the significant transition to underlying growth of 103,000 new policies in the last six months. October results indicate that policy growth outpaced the average policy growth achieved during the third quarter. The fundamental repositioning of the farmers' exchanges is manifesting inorganic growth for the first time in over a decade. Additionally, an exceptionally healthy surplus ratio of 50.9% up more than 500 basis points from the half-year, means the exchanges have established a fantastic platform to achieve the mid- to high-single-digit growth ambition announced earlier this year. Lastly, our live business continues to deliver profitable growth. Gross written premiums rose by 11% to $26.8 billion, and fee revenues increased by 17%. Growth was driven by strong demand for capital-efficient savings and protection products. New business continued to show attractive margins at 6%, up from 5.7% reported in the first half. This led to $879 million of new business CSM, the highest nine-month level since the introduction of IFRS 17. with a sequential acceleration in the third quarter. Protection continued to grow profitably, with gross return premium up 6% in EMEA and APEC on a life-for-life basis. Furthermore, a robust sequential improvement was evident in Latin America in the third quarter, as bank distribution sales activity in Brazil returned to more normal levels. Populations are aging, Government debt is burgeoning and increasing levels of wealth accumulation gives us a lot of confidence there is highly attractive long-term opportunity to address the size of all life protection debt. This further augments our earnings generation and is consistent with our focus on capital light, high cash conversion, insurance profile. Now, let me briefly touch on our capital position. Zurich's SST ratio remains very strong, estimated at 257% as of September 30th, reflecting profit generated in the period and positive financial market performance, partially offset by dividend accrual and the redemption of subordinated debt during the month of October. This balance sheet's solidity is a direct consequence of our disciplined capital management approach, high return earnings, and prudent reserving philosophy. Looking ahead, we enter the final quarter of the year with strong financial resilience and a clear focus on executing against our 2027 financial ambitions. At the nine-month stage, we have made a strong start to the new financial plan. Our diversified business model, discipline underwriting, and capital strength, all positions as well, to capture future growth opportunities and deliver attractive industry-leading returns for our shareholders. Thank you for your attention. Mario and I are now happy to take your questions.