ZurichInsurance Group Zurich Insurance Group Annual Report 2015 Annual Report 2015 Zurich Insurance Group www.zurich.com Mythenquai 2 8002 Zurich, Switzerland Phone +41 (0) 44 625 25 25 www.zurich.com 48559–1602 Q4_2015_16_AR15_Shareholder-Info--Glossary--Contacts_en.inddQ4_2015_00_AR15_Cover_en.indd 1 4 23.02.2016 10:33:15 Q4_2015_01_AR15_Group_Overview_en.indd 1 22.02.201623.02.2016 18:45:5310:39:08 Zurich Insurance Group Annual Report 2015 About Zurich Zurich is a leading multi-line insurer that serves its customers in global and local markets. AA–/stable Standard & Poor’s financial strength With about 55,000 employees, we provide rating on Zurich Insurance Company Ltd a wide range of general insurance and life (December 31, 2015) insurance products and services. We serve 3 55,000 1 individuals, small businesses, and mid-sized Employees (approximately) 1 and large companies, including multinational (December 31, 2015) corporations, in more than 170 countries. 4 170 + 5 Countries (December 31, 2015) 2 Our business segments General Insurance Global Life Farmers 2 Business Business Business Property and casualty insurance Protection, savings and Management services related and services, risk insights investment solutions to property and casualty insurance Market segments Market segments Market segments Individual, SME, commercial Individual, commercial of the Farmers Exchanges 3 and corporate customers and corporate customers Individual and commercial customers Distribution channels Distribution channels Agents, banks, brokers, direct, Agents, banks, brokers Distribution channels other distribution agreements and independent financial advisers, of the Farmers Exchanges 3 employee benefits consultants, direct Exclusive and independent agents, direct Geography Global Geography Geography The Annual Report is published in English and German. In the event of inconsistencies Global United States in the German translation, the English original version shall prevail. USD 864 m Business operating profit USD 1,300 m USD 1,421 m Design by Addison Group, www.addison-group.net Business operating profit Business operating profit Photography by Ivan Stefania except for cover image by Zurich Insurance Company USD 34,020 m Gross written premiums USD 29,037 m USD 2,786 m Publishing system: ns.publish by Multimedia Solutions AG, www.mmsag.ch and policy fees Gross written premiums, Management fees policy fees and insurance deposits and other related revenues Cover printed on Heaven 42, an environmentally friendly paper sourced from well-managed forests independently certified according to the rules of the Forest Stewardship Council ® (FSC). Content printed on MultiOffset, an environmentally friendly paper made from totally chlorine- free pulp also sourced from well-managed forests independently certified according to the rules 1 This number also corresponds to the average number of employees in 2015. of the Forest Stewardship Council ® (FSC). 2 The Farmers Exchanges are owned by their policyholders. Farmers Group, Inc., a wholly-owned subsidiary of the Group, provides certain non-claims administrative and management services to the Farmers Exchanges as attorney-in-fact and receives fees for its services. 3 All references to ‘Farmers Exchanges’ mean Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and Printed climate neutrally with ClimatePartner using green electricity end of February 2016 their subsidiaries and affiliates. The three Exchanges are California-domiciled interinsurance exchanges owned by their policyholders with governance oversight by their Boards of Governors. by Neidhart + Schön AG, www.nsgroup.ch. ISO 14001 certified. Q4_2015_01_AR15_Group_Overview_en.inddQ4_2015_00_AR15_Cover_en.indd 2 2 22.02.2016 18:45:53 Q4_2015_16_AR15_Shareholder-Info--Glossary--Contacts_en.indd 3 23.02.2016 10:33:1510:39:08 Zurich Insurance Group Annual Report 2015 About Zurich 1 Group overview Group A global presence Contents Zurich operates globally and locally, Group overview according to our customers’ needs. Performance overview 2 Message from the Chairman 4 Business environment 6 How we create sustainable value 8 Our strategy 2014 – 2016 10 3 Business review 2015 12 1 Governance Corporate governance report 24 4 Remuneration report 68 Governance 5 Group performance review Operating and financial review 106 2 Risk review 122 Financial information Consolidated financial statements 158 Holding company 260 Shareholder information 276 1 3 Contact information 279 North America Europe Glossary 280 In North America, Zurich is a leading Zurich has major operations commercial property-casualty in Germany, Italy, Spain, Switzerland, insurance provider serving the and the UK and a significant global corporate, large corporate, presence in other countries. performanceGroup review middle market, specialties and programs sectors. It also serves 4 life customers in the retail, Middle East & Africa affluent and corporate markets. Our business spans the region with key operations in the Middle East, 2 South Africa, Morocco and Turkey. Latin America Zurich operates in Argentina, 5 Brazil, Chile, Colombia, Mexico Asia Pacific and Venezuela. Zurich has operations in Australia, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Singapore and Taiwan. Financialinformation Our cover We serve individuals, small businesses, and mid-sized and large companies. All of our customers, large and small, rely on us to help them understand and protect themselves from risk. Q4_2015_01_AR15_Group_Overview_en.indd 1 23.02.2016 14:04:52 2 Group overview Annual Report 2015 Zurich Insurance Group Performance overview Financial highlights (unaudited) Change in USD millions, for the years ended December 31, unless otherwise stated 2015 2014 in USD1 Business operating profit (BOP) 2,916 4,638 (37%) Net income attributable to shareholders (NIAS) 1,842 3,949 (53%) Total Group business volumes 2 67,988 74,434 (9%) Net investment return on Group investments 3 3.8% 4.5% (0.7 pts) Total return on Group investments 3 1.7% 8.6% (6.9 pts) Shareholders’ equity 4 31,178 34,735 (10%) Diluted earnings per share (in CHF) 11.86 24.17 (51%) Book value per share (in CHF) 4 209.27 232.65 (10%) Return on common shareholders’ equity (ROE) 5 6.4% 13.0% (6.6 pts) Business operating profit (after tax) return on common shareholders’ equity (BOPAT ROE) 5 6.4% 11.2% (4.7 pts) See page 107 for a more detailed financial highlights table. 2015 Business operating profit Business operating profit7 Shareholders’ equity by business segment6 (in USD millions) (in USD millions) USD 1,421m USD 864m 5,000 4,680 4,638 40,000 34,735 32,503 4,000 31,178 30,000 3,000 2,916 20,000 2,000 USD 1,300m 10,000 1,000 24% General Insurance 36% Global Life 0 0 40% Farmers 2013 2014 2015 2013 2014 2015 1 Parentheses around numbers represent an adverse variance. 2 Total Group business volumes comprises gross written premiums, policy fees, insurance deposits and management fees generated within General Insurance, Global Life and Farmers. 3 Calculated on average Group investments. 4 As of December 31, 2015 and December 31, 2014, respectively. 5 Shareholders’ equity used to determine ROE and BOPAT ROE is adjusted for net unrealized gains/(losses) on available-for-sale investments and cash flow hedges. 6 All amounts are shown in U.S. dollars and rounded to the nearest million unless otherwise stated, with the consequence that the rounded percentages may not add to 100 percent in all cases. All ratios and variances are calculated using the underlying amounts rather than the rounded amounts. 7 Includes Other Operating Businesses and Non-Core Businesses. Q4_2015_01_AR15_Group_Overview_en.indd 2 23.02.2016 14:04:52 Zurich Insurance Group Annual Report 2015 Performance overview 3 Group overview Group Strategy highlights 2015 • Investing in distinctive positions 2015 Key results We are acquiring a major U.S. crop insurer. Global Corporate and Corporate Life & Pensions increased the number of large corporations they jointly serve. USD 2.9 bn Our bank distribution networks saw continued growth, Business operating profit (BOP) capitalizing on our access to millions of customers in 15 countries. • Managing other businesses for value USD 1.8 bn We retained more business from maturing life policies Net income attributable to shareholders (NIAS) and reduced the number of policies that lapse. We exited some non-core businesses, including in the UK, Singapore, Australia and the Middle East. Targets over strategic period • Growing our operating earnings We initiated programs to achieve savings and increase BOPAT ROE1 2015 efficiency. We added more than USD 3 billion of less-liquid assets to the Group’s balance sheet in 2015, 6.4% enhancing our investment return. Target • Building supporting capabilities We made progress in recruiting, developing and retaining 12 – 14% a diverse, talented workforce. We became the first global insurer to be certified under a gender equality Z-ECM 2 To October 1, 2015 standard. We introduced a Swiss-style apprenticeship program in the U.S. 114 % Target • Living up to the Zurich Commitment Zurich achieved its highest score since joining the 100 – 120% Dow Jones Sustainability Index (DJSI) of 83 and outperformed 99 percent of other companies in Net cash 2015 the insurance industry group. We reached over remittances USD 1 billion in overall impact investments in 2015, USD 3.9 bn an increase of 54 percent. Our flood resilience alliance extended its work with at-risk communities. Cumulative 3-year