Zurich Insurance Group Annual Report 2019 Innovation with you in mind Zurich Insurance Group Annual Report 2019 Group overview Governance Risk review Financial review Contents About us Group overview Zurich Insurance Group (Zurich) is a leading multi-line Message from our Chairman 2 insurer that serves its customers in global and local markets. Message from our Group CEO 4 Our strategy 8 With about 55,000 employees, it provides a wide range Delivering on our strategy 10 of property and casualty, and life insurance products and Our business model 18 services in more than 215 countries and territories. Stakeholder report 2019 20 Zurich’s customers include individuals, small businesses, Z Zurich Foundation 28 and mid-sized and large companies, as well as multinational Consolidated non-financial statements 29 corporations. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. Governance Message from our Chairman on corporate governance 38 Corporate governance report 40 Message from our Remuneration Committee Chairman 90 Remuneration report 92 Risk review Message from our Group Chief Risk Officer 126 Risk review 128 Financial review A guide to using this report Message from our This interactive PDF is designed to help you easily navigate the report and find the Group Chief Financial Officer 164 information you are looking for. Financial overview 166 It is compatible with both desktop computers and tablet or mobile devices. Message from our This report is optimized for viewing with the free software Adobe Acrobat Reader Group Chief Investment Officer 176 or Apple Books. Interactive functionality may not work when viewed in a web Consolidated financial statements 178 browser or other PDF readers. Holding company 296 Use the tabs and buttons at the top of the page to navigate between sections and around the document: Glossary 310 Contact information 313 Guide to the navigation buttons: Guide to the clickable dynamic links: Our cover: We aim to meet growing demand Page reference to more information from customers for ways to encourage health and Return to interactive contents elsewhere in the document ‘wellness.’ That includes an app we have introduced Page back in Australia, LiveWell, that is motivating life customers Link to online content to adopt healthier lifestyles. Page forward More on page 11 Return to previous view Search Further information Print For more information about Zurich Insurance Group, visit us online at: www.zurich.com Our renewed focus and commitment to sustainability Throughout this year’s report, we have used this icon to highlight our sustainability-centric approach in action. Zurich Insurance Group Annual Report 2019 1 Group overview Governance Risk review Financial review Welcome For nearly 150 years, we have been ahead of our time, embracing innovation while finding new ways to serve and protect those who rely on us. We are proud of all that we have achieved. Our experience and ability to adapt to a changing business environment allow us to look to the future with confidence.” Mario Greco Group Chief Executive Officer Highlights USD 5.3 bn USD 4.1 bn 14.2% Business operating profit 1 Net income attributable Business operating profit after to shareholders (NIAS) tax return on equity 2 USD 3.4 bn USD 52.3 bn USD 205 bn Cash remittances 3 Total revenues 4 Investment portfolio 5 CHF 59.4 bn Z-ECM 129% AA-/positive Market valuation as of Zurich Economic Capital Model Standard & Poor’s financial strength December 31, 2019 (Z-ECM) ratio estimated as of rating of Zurich Insurance Company Ltd December 31, 2019 6 as of December 31, 2019 USD 4.6 bn 22.6% 1.9 tons Total amount of impact investments 7 Female participation CO2e emissions per employee in Leadership Team (tons per FTE) 8 1 Business operating profit (BOP) indicates the underlying 6 The Z-ECM is an internal measure of capital adequacy and performance of the Group’s business units by eliminating reflects midpoint estimates with an error margin of +/– 5 pts. Over 1 million the impact of financial market volatility and other non- 7 Impact investments in 2019 consisted of: green bonds Number of customers interviewed operational variables. (USD 3.1 billion), social and sustainability bonds (USD 539 million), 2 Shareholders’ equity used to determine ROE and BOPAT ROE and investments committed to private equity funds 9 through Zurich’s NPS program is adjusted for net unrealized gains or losses on available-for-sale (USD 163 million, thereof 36 percent drawn down) and impact investments and cash flow hedges. infrastructure private debt (USD 747 million). 3 Cash remittances for full year 2019. 8 Number shown as of 2018; 2019 data will be available in 4 Total revenues excluding net investment result on Q2 2020. unit-linked investments. 9 In 2019, Zurich interviewed over 1 million customers 5 Market value of the investment portfolio (economic view). (including Zurich Santander) in 25 countries through its NPS See page 176 for more information. (Net Promoter System) program. Zurich Insurance Group Annual Report 2019 2 Group overview Governance Risk review Financial review Message from our Chairman Delivering long term value for all our stakeholders Strong progress is being made on our strategy. And innovative ideas and insights are being produced that allow us to benefit all stakeholders.” Michel M. Liès Chairman of the Board of Directors Zurich Insurance Group Annual Report 2019 3 Group overview Governance Risk review Financial review Message from our Chairman As Zurich’s three-year Today many people – particularly the With the pace of change in the industry strategic cycle concludes, we can younger generations – are facing an uncertain accelerating, our success in the last three look back on 2019 as a year future. As an insurance company whose years gives us confidence of thriving in this of achievement and validation. core business is protection, we have a special fast-moving environment. We have therefore responsibility in creating an environment set ambitious new financial targets for It has not always been easy, where all can prosper. 2020 – 2022, and the Board is working closely but our ambitious financial targets with management to turn firm commitments We take this responsibility seriously and are for 2017 – 2019 have all been into tangible impact. living up to it, because nearly everyone exceeded, a dividend of CHF 20 we come in contact with is touched by the Together, and with our people, we can make per share has been proposed dramatic changes taking place in society. the 2020s a standout chapter in Zurich’s to shareholders, and trust and In 2019, we made clear commitments to drive proud history. Thank you for your continuing confidence has returned to solutions on climate change, help individuals support in this journey. the business. and businesses adapt to the changing world of work, and build trust in our digital future. More than this, I am very pleased with the In 2020, those commitments will be followed energy that is being devoted to Zurich’s by concrete actions. long-term success. Strong progress is being Michel M. Liès Chairman of the Board of Directors made on our strategy. Zurich is focusing Decade of delivery on customers and simplifying its business. And innovative ideas and insights are The last decade ended with proof that Zurich’s For our Chairman’s message on being produced that allow us to benefit initial efforts to become simpler and more governance, please see page 38 all stakeholders – including customers, innovative are working. And there is so much employees, shareholders and communities – more to come. both now and in the future. 2020 marks the beginning of a new three- year strategic cycle for Zurich. During this Creating value for all stakeholders time, we will focus even more on innovating Zurich has a long history of going above to meet customer needs. Technology is and beyond for the people who put their raising the expectations customers have trust in us. It has been the foundation of of insurers. But it also creates untold our success over the past 150 years. opportunities to delight them with new approaches to preventing as well as covering risk. Our business segment performance Property & Casualty Life Farmers Property and casualty insurance Protection, savings and Management services related and services, risk insights. investment solutions. to property and casualty insurance. USD 2.9 bn USD 1.5 bn USD 1.7 bn Business operating profit Business operating profit Business operating profit USD 34.2 bn USD 33.5 bn USD 3.8 bn Gross written premiums Gross written premiums, Management fees and and policy fees policy fees and insurance deposits other related revenues More on page 168 More on page 170 More on page 172 Zurich Insurance Group Annual Report 2019 4 Group overview Governance Risk review Financial review Message from our Group CEO After achieving much, our journey continues Our performance over the past few years puts us in an excellent position to pursue our customer-focused strategy with energy and deliver on our ambitious new targets for the next three years.” Mario Greco Group Chief Executive Officer Zurich Insurance Group Annual Report 2019 5 Group overview Governance Risk review Financial review Message from our Group CEO Our goal as an insurer is to protect That’s a complete transformation of the way Surpassing customer expectations people. Traditionally, this has insurance works and has worked for the At its core, the journey of transformation that meant paying claims promptly. last several centuries. It’s not a transformation we are on is about putting customers at that can happen overnight or even in the Now, technology is creating the the heart of everything we do. It is about space of a few years.