Zurich Insurance Group Ltd

Welcome to the call this afternoon. I have with me our Group CEO Mario Greco and our Group CFO Claudio Cordioli. Before I hand over to Mario for the introductory remarks, could I please remind you to keep your questions for the Q&A session to a maximum of two, please. And also as a reminder, we'll not be taking any questions on the potential offer for Beazley PLC. For any information on that, please refer to our website. And with that, I'll hand over to Mario.

Thank you, John. Good afternoon, everybody, and thank you for joining us. Let me provide a few remarks on our results before Claudia and I will hand you questions. We've made a very strong start to our new financial cycle with the record results, which indicate that we're well on track to achieve or even exceed our 2027 targets. Pop is at 14% to a record level of $8.9 billion, with core EPS at 13%. Net income attributable to shareholders is also the record level of 6.8 billion US dollars. Core ROE reached a new high of 26.9%, and as we continue to produce exceptional returns on capital while carefully pursuing disciplined growth. Profitability reached the record level across each of P&C life and farmers. P&C gross return premiums exceeded $50 billion for the first time, while their BOP exceeded $5 billion also for the first time. Life produced an underlying increase of 10% in BOP, while farmers produced another outstanding result with growth in policy count accelerating through the year, supported by the exchanges reporting a command ratio of 84.6%. Crucially, we also continue to demonstrate a structurally high level of conversion of earnings into cash, with remittances of $7.4 billion. This, together with Zurich's signature financial strength, underpins a proposed dividend of 30 Swiss francs, which is at more than 7% on prior year, supported by a payout ratio of 76%. This means that the dividend will have increased by 50% since 2020, by 76% since 2016, and this is the eighth increase in 10 years. Looking at our business segments in turn, the P&C business today reports an excellent combined ratio of 92.6% with the BOP up by 22%. Commercial insurance saw the combined ratio improve by 1.2 percentage points year over year to 91%. It was especially pleasing to see the benefits of the ongoing portfolio optimization actions that we have spoken about showing in the results. Crop produced much improved results with the combined ratio in the low 90s. while commercial auto in the United States saw a year-on-year improvement of more than 18 points in the combined ratio. We continue proactively steering the portfolio, taking corrective actions on areas where there is scope for improvement, while pursuing careful growth in strategic priority segments such as middle market and specialty. Within specialty, we see construction as a particular opportunity. We have a unique set of skills and capabilities, with Zurich playing a leading role in supporting the rapid AI-driven growth in demand for data centers. In the US alone, last year, we were involved in insuring more than 200 projects with a total insured value of $150 billion. We see similar secular growth trends across the broader technology space, and also in infrastructure more generally. We continue to reserve carefully with the strong results of the year achieved while also continuing to build our balance sheet strength. For retail, while there is still plenty of opportunity to improve returns from here, 2025 saw a very encouraging level of improvement. Retail P&C BOP increased by 50% year over year. with the results having improved fourfold from the level reported in 2023. Growth in retail growth switching premium was very strong, with a 16% increase in U.S. dollars and 7% on a like-for-like basis. This was supported by positive rate increases of 5%. However, is it also good to see the underlying structural improvement being driven by increasingly sophisticated pricing and risk selection. The January renewals in key markets such as Switzerland and Germany give us confidence in our ability to drive further upside from here. The life business continues to perform extremely strongly, reporting an all-time high BOP of $2.3 billion, with both the insurance service result and the fee result improving year on year. We also ended the year with a record high CSM. Our strategic focus on protection continues to pay off with a 5% increase in protection gross return premium year-on-year on a like-for-like basis. For the discrete second half, growth accelerated to 7%, driven by recovery of the bank assurance sales in South America. New business premiums in the CSM perimeter grew by 14%, on a like-for-like basis to $19.5 billion, while short-term insurance sales grew by 9% in local currency, with promising signs of renewed momentum in bank insurance in Brazil. Farmers. 2025 was another year of delivery for farmers, with the exchanges producing 4% growth in gross return premium, supported by a combined ratio of less than 85%. A major milestone was reached with the policy count growing organically for the first time in over 10 years. Since turning positive in Q2, growth has accelerated through the year. The farmers team have a clear roadmap to continue improving the product offer, driving distribution efficiency, and accelerating the growth rate to the mid to high single digits range. Now looking into the future, I'm pleased at the start we have made to our new cycle. That's really a very good start into the three-year plan. And we see significant opportunities for the business to grow and generate attractive returns for our shareholders. Before we turn to the Q&A session, I would like to make clear that we will only take in questions related to this results announcement. and we will not be making any further comments, basically, as John said before. With that, Claudia and I will now be delighted to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Kindly limit yourself to two questions only. Anyone who has a question or a comment may press star and one at this time. The first question comes from Michael Hutner from Berenberg. Please go ahead.

Fantastic. Thank you. Well, congratulations on the outstanding results. So many questions. One very general one, AI risk to farmers, and another one, which I suppose is more also quite general. Your pricing improved by 2% for the year and 3% at nine months, which doesn't seem as strong as the tone you're using to describe your results. I just wondered if you could square the circle a little bit. When I spoke to your outstanding IR team, they highlighted that property commercial was down I know margins are high, but we always worry. There we are.

That's it. Michael, I'm not 100% sure what is the question. Look, on margins, first of all, let me stress a point which is quite important for me. We have done a lot of work, and you see that in a page of our presentation, reducing the impact of NATCATs on us. And we have been beating the rest of the market on that. So I think we have now superior portfolio of NATCAT exposed risks that generate less losses than the others have. And this means that having better customers that produce less losses, you don't have to charge them. as much as the others do. And it also means that we have higher loyalty and higher retention rates practically than the others have. On commercial, look, the way I see the market today is casualty, especially excess casualty, still has to recover. And double digit price increases are probably not yet fully sufficient to rebalance the market to where the profitability has to be. Commercial auto fully deserves double-digit price increases. Property is in a good space until catastrophes will happen. And then when they will happen, let's see, what's the impacts? on the industry and what's the impact on every player. And I expect that we will be much less impacted than the average of the market. Also, remember what we said and what is true. We have remained very prudent and very careful in managing our reserves and our margins consequently. We're not in a sprint and we're there to deliver 27 and after 27, we will be there to deliver the next three years. I don't know if I answered your question, so. Yeah, brilliant.

And on farmers, the AI risk was a big topic last week where we all thought that farmers would lose all its business to machines.

But I, look, what is the risk there? I mean, I thought that the old discussion over last week was about distribution and customer preferences. Besides that, that discussion has been around for many years. What is precisely the risk? I mean, the agents are not the property of farmers. If the customers want to go directly, they can deal with farmers directly. if they like that. Farmers is already living in a multi-channel distribution system. I don't see that as any relevant specific risk for farmers or for us. This discussion about disintermediating insurance has been there for many years. One day it will happen. but we are completely neutral to distribution channels. And we have been growing our business with alternative distribution channels everywhere, including at farmers.

I will probably add, Michael, it's Claudia here, that AI and the deployment of AI has made the agency force in pharma is actually much more efficient. So talking to Raul and the team, they were highlighting that in general, so overall, the agency force has reduced the operating costs last year by approximately 20%, and the more technology saving agents have actually managed to reduce costs by 40%. So the fact that They can deploy those AI tools and Raul has been quite explicit in the technology they developed and the platform they are now deploying to the agency force. They managed to actually write more business, be more effective in the way they reach out to the customers. They're able to use the data they've got available in a more sophisticated way. The team at Farmers is actually positive and they embrace the technology in a way that they believe will help them grow at lower costs rather than a threat.

Super. Thanks so much. Apologies for disappointing you on the dividend. Yes, that's always my point. Thank you for that. Next year, hopefully. Yes, next year we'll try better and harder. Sorry for that.

The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.

Yes, thank you, Mario. Thank you, Claudia. So for me, I'll stick to one key question for me is that, you know, when I see the presentation today on the speciality lines and just if I can, I mean, just referring to, for example, slide 10, I mean, I see that the AY core is getting a little worse despite obviously the construction getting much better. So, you know, it means that some other lines are suffering a bit. I mean, also when I hear the reinsurance speak in the last few days of reporting, it's all about speciality lines facing a little more pressure. And, you know, I know we keep asking you about this, but I mean, how, what's happening on the speciality lines, please? Is it like, because that's your core strategy and If there is more pressure there, what should we be thinking from the outside about looking at this chart going up a little bit on slide 10?

Thank you. I don't think, I don't feel the pressure. If you look at this page 10, it says that we have grown the share of construction inside specialty. And construction is a business that cannot be run at 85% combined ratio. And so what you see on the left side is just a mathematical result, pretty much of a progressively heavier construction specialty portfolio. So I don't see much of this pressure. It's not under pressure. It remains an incredibly stable and rich line of business with the change more recently that construction and infrastructure is in very high demand. And if we look at the book of business that we see coming for 26, this will pretty much remain the story for us also in 2026. And we will try hard to serve all the customers that are requesting support in the US and in Europe.

construction and infrastructure but it's pretty much a mathematical consequence of a and composition of the books of which is tilting towards construction and infrastructures you know and if I can squeeze in the second one now that I'm the opportunity please you know any motor the retail linear motor book in the original plan the idea was to get our ambition was to get to about ninety six combined ratio, and one that's already worth doing much better. But is that ambition still at the same level? Is it being achieved easily? Because I don't see the India motor print anywhere, so I'm just curious on that.

Thank you. Yeah, we think there is still, I think I said that, but we really think there is still progress to be made this year. We're not where we expect to be in retail. Germany and Switzerland filed 10 rate increases, and market reaction was fair. We haven't lost significant loyalty retention with these rate increases, so the market is conducive for that. We expect retail to continue improving, especially through this year. You know, the emerging markets are a different story because it can take longer for them to show the improvement, but they're tiny. They don't have an impact. And there's definitely not a short-term play for us in all of these emerging markets.

Thank you, Mario. Thank you very much. You're welcome.

The next question comes from Andrew Queen from Autonomous. Please go ahead.

Good morning. A couple of questions, if I can. Firstly, could you talk a bit about retail non-motor? just the size of it, whether it's deteriorating or improving, and just talk a little around that. And secondly, in commercial lines, you talk about mid-market and specialty, which is about half your commercial lines book. I'd like you to talk a little bit about the other half, which I think half of that is crop and captives and direct marketing, but half of it is your large corporate where there's greater rate compression. Could you talk a bit about the results there and how that's looking?

Yeah, Andrew, starting from that, large property is, I would say, the most profitable line of business at this moment. Through risk selection and through the progressive development of the portfolio, actually large property is very, very profitable at the moment. CROP, I think what Delene Hawk did there was a masterpiece. She has transformed our portfolio. If you will run a deep dive on CROP and you compare the portfolio we had in 2024 with the portfolio we have at the end of 25, it's impressive. If you look at 23, 22, You wouldn't believe it. Geographically, she moved out of some states and she grew other states. Costs, she's taken out a significant portion of fixed costs in the product balance between the private products and the public ones. Thorough transformation of it. It's a totally different business, honestly, and it shows, once again, if we needed a demonstration, what's the value, what's the power of good management on running this portfolio. I mean, similar to what we saw, farmers, you put a good, strong manager leading a business, the results come very quickly. Captive is a $3 billion business, I think, in revenues all together. It's very significant. It's growing. We're quite happy with that. It's profitable. Programs has been the subject of actions, especially on the commercial auto side. And this is what you saw also in the negative volumes of the mid-market, because program belongs to mid-market in our classification. And there we just canceled portfolios of commercial auto, which we did not trust anymore that could could be uh could be brought back to profitability um the the weak point in our results remain on casualty especially excess casualty there the rate increases are necessary and there our underwriting continues to carefully look at customers' guarantees, exposures, and finally workers' comp is super stable. We continue not to deliver sufficiencies to profits. We continue to reinvest them, but the portfolio remains stable, profitable, as it was in the past years. Does that answer your question on commercial entry? and more to retain thank you yeah look retail no motor broadly speaking very positive results out of europe some huge events in europe for example in switzerland the famous mudsliding disaster but every year you have a number of these results but really pleased with the European profitability. The expansion of the business in Australia on SME is also kind of not worthy for us. So we've been struggling many years in Australia on growing the business and also in growing profitably over the past three, four years. The colleagues there have done a remarkable job of stabilizing growth and results there. So I'm quite pleased. Having said that, we still think that we need to recuperate between one and two points of combined ratio in retail altogether between this year, the majority of it, and maybe the final part of it next year. Thank you.

The next question comes from Hadley Cohen from Morgan Stanley. Please go ahead.

Hi, thanks very much. First question, I think going back to the plan, one of the targets was for more than $10 billion of GWP in mid-market space. Just given the current sort of dynamics and trends and what have you, are you still comfortable with that target or is that something that you're rethinking? And then second question, please. The 7.4 billion remittances is obviously a very, very strong number and a lot more than the run rate implied by the 19 billion cumulative target and also higher than the net income for the year. Is it possible to tell us where the sort of excess has been coming from and how much scope there is for more of that to come going forward. Thank you.

Look, I'll answer mid-market, and Claudia is getting ready to answer on liquidity creation and cash generation. Look, mid-market, remember that we had there the program cancellation there, which is a kind of one-off. Stripping that off where we saw the mid-market, it was growing at near double-digit numbers, which is what we need to achieve to target. So we remain confident that we're going to reach that target. We don't plan to do other restructuring actions at the moment. So if nothing new emerges over the next 12 months, we think will drive this to the target as all the other targets that we indicated.

And I had to give you an indication of how we see January, even though it's a relatively contained renewal, but the U.S. are already seeing positive development in terms of the demand in middle market. So please remember that All the actions that we've been talking about, the portfolio management actions that we've taken in 2025 went against the growth, right, the headline growth in middle market. Now the investments that we made in the last few quarters are starting to come through. We've been hiring last year alone in the U.S. roughly 100 underwriters and over 50 in Europe. So obviously the production didn't come through yet in 2025. It's starting to come through now. And we're seeing actually growth in the U.S. in the low teens in January. Again, it's a limited data point. I appreciate that. But the direction is definitely the right one.

And rates here are still positive.

Rates are positive. Exactly. That's another positive indication. So we are actually happy and comfortable with what we're seeing from the market. On the cash remittances point, you're right, so if we take as a run rate, the 85% normalized cash conversion rate that we are taking on NEAS, the 7.4 billion is slightly higher than that. We had two, let's call them management actions that I will flag. One, the largest one, is the fact that we've been optimizing our insurance structure from the US on the US cap business and that's coming through in the ability to release liquidity. So that was sizable in 2025. The second point was related to the UK pension business. There has been as well a limited amount of cash remittance that we could repatriate related to that. you should expect us to be able to continue to optimize liquidity over the planned period. So not going to commit to number other than obviously our three targets of cash remittances above 19 billion. But as we said previously, it's a large balance sheet. There are many opportunities for us to continue to optimize. So I will see us well on track to achieve or exceed that target.

Very clear. Thank you.

The next question comes from William Hawkins from KBVW. Please go ahead.

Hello, Mario and Claudia. Thank you for taking my questions. First of all, the outlook for the life business, your CSM has grown 18% and your life business is less anchored to the CSM runoff than some of your peers. So you also seem to be growing really well in the short-term business. You flagged 9% in your remarks, Mario. So bringing all those points together, I'm not sure why you're being so cautious in just talking about mid-single digit growth, profit outlook for the business. Is it just that you're conservative or is there sort of some headwind that I'm not appreciating?

That's our style, William. That's our style. We're always conservative and we always like to exceed. And especially in life, we have always done that, which I'm not necessarily very proud of. But as a matter of fact, it's very consistent with, if you look back, we have always done that in life. So there is nothing else to be known about that. It's just our usual consistent style in life to promise little and deliver more.

Thank you. My second question, I'm still really pondering the outlook for your non-life combined ratios. and I know you don't guide to it as a specific number, but it's giving me a headache. You said very clearly at the 3Q stage that Zurich is not the kind of company that smoothens like cats, unlike its peers. So I just want to check, first of all, when we get to the end of the year, was that actually the case? And if it is the case, I can't see how you're not from here. The second half seems to show a deteriorating attritional claims ratio, and the outlook for 2026, implies a very big headwind from the normalization of cats of something like one and a half to two percentage points which even given the positive stuff that you said about retail you know that's only part of the business i find it very hard to see how you don't have an overwhelming headwind um to the outlook for your combined ratio for this year so i'm assuming there are positives that i'm not mentioning so can you just help me understand what may be the positive drivers or am i right that

just had an amazing year and by definition you can't have an amazing year every year i would agree i don't think we had an amazing year i so first of all if i compare our napcat results with the peers i think we are establishing ourselves at least i would say a couple of points below our american peers and this is uh risk selection is the way we built our portfolio It is consistent. This is method. It's not luck. And it has been stable over the past years and will continue like that. Second, it is true what you said. We want to be prudent, and we don't want to release and then adjust. And so we clearly took advantage this year to build on our reserve strength. Third, I think the more we progress, the more the weight of the specialty and the mid-market portfolios will weigh in and will benefit our total combined ratio. Fourth, I think there is work that can be done and that we're doing now on our expenses, and this work will create further buffers this year, next year. on our results. Does that make sense?

That's really helpful. Thank you.

The next question comes from Kalish Mistry from Deutsche Bank. Please go ahead.

Hi, good afternoon. Just wanted to come back on the cash question. Could you just let us know what the cash balance was at the holding company at the end of the year following the strong remittances. Secondly, could you just let us know roughly what you see as your debt capacity? And then lastly, if I could just squeeze one in, just back on the life business, obviously very, very decent results there. But when you look through the CFM roll forward of the different segments, there's a lot of half a billion one-off movements in variances and other lines. Is that just business reclassification or is it something else? Thank you.

Look, on cash, I would say that it's more than adequate what we have today in our wallet. On the size of debt that we can take and the CSM movements, I beg Claudia to answer your question because I would not be able to do that myself.

So, on that capacity, we're not constrained by our leverage ratio. In fact, we've been improving our leverage ratio both on an IFRS basis but also the Moody-based calculation from the end of 2024 to 2025. That said, we are in a good and very comfortable position where we are today, so I would expect, if anything, our balance sheet size and equity to grow over time. And we've seen that happening in 2025. So leverage should actually go down in terms of leverage ratio over the planning period. On CSM, sorry, can you repeat the question? I'm not sure I fully heard that.

Yeah, so on the CSM, at the aggregate level, all looks okay. But when you dig into the different segments of protection, unitly savings and annuities. There's a lot of half a billion dollar movements in other lines and operating variances. So just wondering if there's something that you need to flag there.

Yes. So thank you for the question. We had a few reclassifications of some businesses where the protection element became prevalent. So we've done those reclassifications there. Nothing really to flag there. of, you know, of, uh, regarding the, the, the underlying business or, or the CSM production strength is a pure classification.

Okay. Thank you. The next question comes from Emanuele Museo from Inteso San Paolo. Please go ahead.

Hello. Hi. Uh, thanks. Thanks for the questions. Uh, actually I have two questions. Uh, so one is, on the Lloyds syndicate that you recently, I mean you initiated the process of starting a syndicate at Lloyds. And I was just wondering whether this is something you may use to leverage the chain of security and therefore improve in a way the capital efficiency of some of your current book. And then the second question is more on capital and in particular the farmer exchanges where the surplus ratio is now at 52.9% which is well above your target. 34% to 38%. And I was wondering, given this excess capital and the reduced pharmacy participation, if there is any plan to accelerate capital returns to Zurich?

No, no, no, no, no, no, no. Hold on, hold on there. There is no way to connect the capital of the exchanges to Zurich. This is capital of the exchanges, not of Zurich. And these are two completely separate worlds. As much as we cannot contribute capital to the exchanges, the exchanges cannot return capital to us. Now, the fact that they have such a surplus is very good because it means that they will be not constrained at all in growing the business. And since we're pushing for growth of the business, not just growth of policy accounts, but also of revenues and accelerating growth, That means that there is no constraint on the exchanges to do that, but it's a totally separate company entity. It's a different world and there is no connection with us in no way that exists. Local Lloyds, we have posted for the moment the request to open a syndicate, waiting to see what happens. with the transaction that we cannot talk about and we will see later if we need to reactivate it or we just let it stay in sleep as it is today. One way or another, through this year, we're going to have a presence of Deloitte syndicates.

And the last question comes from Michael Hutner from Berenberg. Please go ahead.

It's my lucky day. Thank you. Very two simple questions. The expense ratio, I just wonder if you could kind of detail. It's gone up. You say for good reasons, and you give many reasons. I just wonder if you could kind of detail and maybe if there's an underlying improvement. So this is from 28.6 to 29.9. And the second question.

The acquisition, Michael.

Ah, okay. Sorry.

This is the first year that we completely accounted for the acquisition. And so part of the growth of retail is M&A driven. There is a page in the presentation that shows the volumes. Let me see. It's page 8 precisely. If you see on page 8, the 1.3 billion movement is M&A indicated. And it's mainly travel guard.

Okay.

There's contact in there as well.

Yeah.

Excellent. Okay. And then the other question is the 900 million corporate expenses and the guidance was or is at 800 to 850. I just wondered if there's anything here to note.

There was some integration expenses included in there as well, Michael, and some ethics impact from the fact that headquarter expenses or a relevant chunk of headquarter expenses tend to be in Swiss francs. So, translating into US dollar, unfortunately, make it look worse. Super. Thank you so much.

Thank you. Ladies and gentlemen, due to time constraints, this was our last question. I'd like to turn the call back to Mr. Mario Greco for any closing remarks.

So thank you very much for all your questions. In conclusion, I'd like to repeat that we're very pleased with this first set of results in the 25-27 cycle. That means that we're well on track to achieve or even exceed our 27 targets. In property and casualty, we continue to focus on agile portfolio steering, looking to actively improve our book while pursuing growth opportunities in a very disciplined way. For life, we have exciting growth initiatives across the globe to pursue as we work to further scale our protection business and accelerate our participation in selected segments of the savings business. Farmers have significant opportunities leveraging its financial flexibility and improved go-to-market capabilities to move to structurally higher growth rates. I look forward with confidence to this year, to 2026, as we look to continue to deliver durable growth with exceptional returns on capital. Thank you very much for participating and for your interest in Zurich.