Global Life Strategy Execution Update

(1)

Global Life –

Strategy Execution Update

Investors’ Day

(2)

Disclaimer and cautionary statement

By attending this meeting where this presentation is made you agree to be bound by the following limitiations.

Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our targeted profit improvement, return on equity targets, expense reductions, pricing conditions, dividend policy and underwriting claims improvements, as well as statements regarding our understanding of general economic, financial and insurance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be

affected by other factors that could cause actual results and plans and objectives of Zurich Financial Services Ltd or the Zurich Financial Services Group (the “Group”) to differ materially from those expressed or implied in the forward looking statements (or from past results). Factors such as (i) general economic conditions and competitive factors, particularly in our key markets; (ii) the risk of the global economic downturn and a downturn in the financial services industries in particular; (iii) performance of financial markets; (iv) levels of interest rates and currency exchange rates; (v) frequency, severity and development of insured claims events; (vi) mortality and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes in laws and regulations and in the policies of regulators may have a direct bearing on the results of operations of Zurich Financial Services Ltd and its Group and on whether the targets will be achieved. Zurich Financial Services Ltd undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise.

It should be noted that past performance is not a guide to future performance. Please also note that interim results are not necessarily indicative of the full year results.

Persons requiring advice should consult an independent adviser.

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PROSPECTUS THAT MAY BE OBTAINED FROM THE ISSUER AND THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE COMPANY AND MANAGEMENT, AS WELL AS FINANCIAL STATEMENTS.

(3)

Global Life –

Strategy Execution Update

Mario Greco

Global Life Chief Executive Officer Zurich, May 27, 2009

(4)

Agenda

Strategy Execution Update

Mario Greco

Global transformation

Operational execution

Global pillar update

Global Life Performance Monitoring

Debra Broek

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

Summary

(5)

Global Life is a key growth engine to

deliver the Zurich Group strategy

Focus on margin enhancement

Focus on volume growth

GC

NAC

EGI

IM

Global

Life

Farmers

Legend for General Insurance business divisions:

IM International Markets EGI Europe General Insurance GC Global Corporate NAC North America Commercial

(6)

Our strategy takes a global approach to

key distribution channels and customer

groups

Bank Distribution IFA/Brokers Agents Private Banking Client Solutions Corpora

te Life

& Pensions International /

Expats Global distribution channels Global propositions Countries Enablers

Three global distribution channels to better serve local customer needs

1

Three global customer groups

Consolidation of manufacturing and

proposition management

Regional hubs and platforms Proposition management Global desks Purchasing Mutual funds Guarantees Risk profile Underwriting (Protection) Reinsurance

2

3

In-force management

(7)

New range of propositions Increase low risk investment choices Special campaigns address customer needs

Build on Zurich brand and capital strength Focus on in-force business Accelerate operational strategy delivery Review additional growth opportunities Government intervention

Pressure to focus on core business

Current banking crisis Flight to safety

Want a safe pair of hands Changing landscape is leading to consolidation in some markets

Service and support increasing in importance Unwillingness to take risk Preference for guarantees Increased savings

Despite current markets our strategy of

globalization is unchanged

Business model remains unchanged Market tactics to respond to changing environment Priority on profits, not on volumes Market disruption provides opportunities Our response Customers Distributors Competitors Regulators Market situation

(8)

Since launching our strategy in May 2008

we implemented a significant

transformation program...

Executing the global strategy

Globalizing our local businesses

6 pillars in place and driving global growth Focus on distribution and operational efficiency Propositions prioritized globally

Transforming the global organization

Performance management systems harmonized globally

Significant technical skills added to the global organization, e.g. Private Banking Client Solutions led by an experienced

insurance private banker

IFA pillar head appointed and experienced team recruited for entry into the Italian cross-border market

(9)

...that enables us to profitably grow scale

Maintaining performance & cost management

New Business Margin maintained at > 20% with APE at USD 3,261m (FY08) and USD 721m (Q1-09)

Focus on profitability

Lean organizational structures

Embedding the global strategy

Country teams provide local market expertise

Regional hubs to manufacture and service products

Centralization to leverage purchasing power & core skills IT Centers of Competence to drive speed to market

(10)

The core of our strategy is a global

approach to distribution and customers…

We focus on three distribution channels to deliver our strategy

Distributor needs converge by channel Our proposition is global in nature while retaining local customization by channel Focus on distributors and

customers

Distributor and customer needs, and not products, drive our strategy

Products are an inherent part of customer and distributor value proposition...

...and they are based on the needs in each of our markets

The three customer facing pillars allow us to meet and service customer needs fully

Customer needs converge globally We deliver insightful products using

globally available skills and manufacturing capabilities

(11)

...based on an industrial value chain

delivered locally using global & regional

resources…

Local country Regional hubs Global desks Local country Global Pillars

Global prioritization of capital

Drive growth and sales ideas locally and in new markets Enable cross market benchmarking and sharing

Propositions Product request Product design Product manufacturing Product services Sales

Proposition request from country Local product specification

Global prioritization of propositions Technical specification of product

Technical manufacturing of product Servicing of cross border products

Product elements added, e.g. funds

Proposition delivery

(12)

Manufacturing on strategic platforms increases re-usability and speed to market

Global desks service hubs and local markets IFA/Broker pillar cross-border entry in 2009 in Italy

Opportunities for growth in new markets using regional hubs continues to be part of our

strategy

Growth in new markets

Substantial unit cost reductions in hubs Re-usable propositions with core products tailored to local market delivery

Core skills based in regional hubs and global desks

…which delivers significant operational

efficiencies

Economies of skill and economies of scale

(13)

Global Life – Regional hubs

te Life

and Pensions International / Expats

Global distribution channels

Global propositions

Countries

Enablers

Regional hubs and platforms Proposition management Global desks Purchasing Mutual funds Guarantees Risk profile Underwriting (Protection) Reinsurance In-force management

(14)

European hub

Manufacturing hub for most EU propositions Value creation by cross-border sales

Leveraging synergies among propositions Efficiency gains through speed to market

We have 5 hubs in place at varying levels

of maturity

DACH hub

Supporting Germany (D), Austria (A) & Switzerland (CH)

Productivity increase and more efficiency Service quality improvement

Corporate Life hub

Global manufacturing hub for Corporate Life First proposition launched in UK in Q1-09 >5 similar solutions in other markets ongoing

International hub

A role model of hub implementation Already supports our business in 14 countries

Private Banking hub

Global manufacturing hub for Private Banking Client Solutions

Launched first propositions into Italy Next phase under development

Work in progress Established

Americas (US & Latam)

Customer segment hubs

Regional hubs

Distribution Propositions

Countri

(15)

Benefits

Capturing efficiency gains through our

German, Austrian and Swiss hub (DACH)

Already servicing the German market

Provide admin. and servicing capability for Austrian market planned by y/e 2009 Achieve productivity increase and savings by fully servicing Switzerland

Reduce time to market by re-using core products/propositions 1. Cost reductions

Use of common platforms Increase in productivity

Centralization of processing

Industrialization of servicing with human/service touch

2. Process improvements

Increased processing speed Improved service quality

Accelerate delivery speed of cross-border propositions through re-use of core product elements

(16)

Purchasing

Mutual funds Guarantees

Global Life – Global Funds Desk

te Life

Countries

Enablers

Regional hubs and platforms Proposition management Risk profile Underwriting (Protection) Reinsurance Global

desks

Global distribution channels Global propositions In-force management

(17)

Global Funds Desk implemented to

deliver results in 2009

More than 2,000 mutual funds and more than 120 fund house relationships

Fragmented fund supplier distribution per country

Business Units manage fund house relationships locally

Fund investments to be placed with a limited number of preferred, high-quality fund houses

Additional fund providers will be

included as required by distributors and customers

All Business Units offering unit-linked business connected to a single trading platform

Our 2008 position... …consolidating into a single global Zurich interface leading to efficiency and procurement gains

(18)

Benefits of the Global Funds Desk to

translate to a BOP contribution

Fully automated e-transactions on a high-end platform Savings of up to 10bps expected Faster

time-to-market for new unit-linked/fund propositions Centrally managed trading platform to capture global synergies Scope Volume Core Principle

What this means...

~ 25-30% of total unit-linked assets are in mutual funds

USD 3-4bn annual new business volumes to be invested in mutual funds expected

Mutual fund holdings expected to be kept above USD 20bn and to grow going forward

Final fund choice is with customer or distributor

(19)

Global Life – Protection

te Life

Countries

Enablers

Regional hubs and platforms Proposition management Global desks Purchasing Mutual funds Guarantees Risk profile Underwriting (Protection) Reinsurance Global Desks Global distribution channels Global propositions In-force management

(20)

Protection APE FY08: USD 441m

Split by Pillar

Protection APE FY08: USD 441m Split by Region 47% 12% 9% 32% Protection NBV FY08: USD 238m

Global Protection Unit established to

focus on our most profitable business

1% 24% 33% 29% 13% Bank Distribution IFA Agents

Corporate Life & Pensions Direct and Central Initiatives

Americas Major regions Emerging Markets Rest of World Complete range of protection propositions Increase focus on add-ons / riders to existing product suite

(21)

Experienced team appointed at y/e 2008

to drive growth in protection business

UK Group Life Launch

Group Life and Group Income Protection propositions launched in February 2009

Targeted at UK large and medium corporates Launch of significant campaign with Banco

Sabadell by June 2009

Farmers’ accidental death benefit program

(ADB)

Launch of an Agent assisted program to customers in Austria by June 2009

(22)

Global Life

te Life

Countries

Enablers

Regional hubs and platforms Proposition management Global desks Purchasing Mutual funds Guarantees Risk profile Underwriting (Protection) Reinsurance Global distribution channels Global propositions In-force management

(23)

Three global customer pillars

Consistent global servicing

standards to customers within a customer pillar

In-depth insight on customer needs by pillar

Develop specific propositions to meet customer needs

Benefits of taking a global view to our

distribution and customer pillars

Three global distribution pillars

Consistent global support standards and models of distribution within a channel Growth through coordinated distribution in new markets

Expand our Direct capabilities in Asia and other emerging markets

(24)

Global Life – Bank Distribution

te Life

Countries

Enablers

Global propositions

(25)

Management responsibility for main relationships like Deutsche Bank and Banco Sabadell

Globally prioritize proposition development initiatives

Implement globally consistent operating model

Deliver methodical approach to cross-border account management

Drive best practice sharing and implementation, via TZW Bank Distribution

Opportunistic acquisition target assessment

New business APE - Bank Distribution

In USD millions

Bank Distribution established a central

team to execute an integrated Life &

General strategy

FY07 Actual FY08 Plan FY08 Actual Q1-08 Actual Q1-09 Plan Q1-09 Actual Improved penetration and

profitability of existing relationships

New territories via “Follow-the-distributor”

New global and local bank relationships

Targeted acquisitions

Growth Strategy Global Pillar Focus

477 746 140 209 269 529 +46% in LC1 1_{In local currency} +121% in LC1

(26)

Sales and marketing activity has been

high with our joint venture banking

partners in Spain

Sales momentum has been maintained

Fast, effective new product launches capturing the Spanish customer needs in current economic climate

low risk

deposit based short term

High inflows reflect high demand for our products

Conversion of unit-linked

products to short-term guarantee products reflects the customer need for guarantees in the current market environment

Net inflows Q1-09 (in EUR millions)

-140 123 ₄₅₀

467

3rd party investments

Group & unit linked

investments

Total net inflows

(27)

Spain total bank APE and NBV exceeded plan in 2008. This trend continued through Q1-09.

In spite of market conditions, the joint ventures are adding more value than planned.

Joint venture sales results in Spain exceed

expectations to date

EUR m 73 154 14 19 92 135 15 19 Q1-09 APE Plan Q1-09 APE Actual Q1-09 NBV Plan Q1-09 NBV Actual FY08 APE Actual FY08 NBV Actual FY08 NBV Plan FY08 APE Plan 0 100 180 160 140 120 80 60 40 20

(28)

Global Life – Agents

te Life

Countries

Enablers

Global propositions

(29)

Switzerland pilot

implemented in August 2008 Germany launched program in January 2009

Hong Kong to launch program by Q3-09

Selected program elements under implementation in other countries (e.g., Italy, Portugal, Spain)

Pilot Farmers’ best practices in Switzerland

Support

Governance Recognition

Agent segmentation

Productivity increase through a distinctive

value proposition to Agents across the

(30)

…showing early success

All-round support for Agents on Life Revision of monetary incentives Strengthening of General Agents leadership and management skills Swiss pilot key initiatives 2007-2008 without Pilot 2008-2009 with Pilot Week

Swiss individual life applications per week, indexed

Year 1 Year 2 +16% average increase in number of individual life applications 100 110 120 130 32 36 40 44 48 52 4 8 10 0

(31)

Drive profitable growth Strategy

Leverage and lead best practices across the Group

Continuous rebalance of product range and sales focus

Key global priorities for 2009

Lead proposition development to deliver local and global solutions Review Field Management

compensation and follow-through on goal alignment for sales executives Execute in-force customer programs Lead and coordinate CRM/cross-selling systems in selected countries

Provide need-analysis tools to Agents for use with Customers

Design and support recruiting efforts Assess distribution opportunities in line with strategic plan

2009 plan to further strengthen

our value proposition to Agents

Local efforts Initiatives launched by individual BUs with GL support to accomplish targets

(32)

Global Life – International / Expats

te Life

Countries

Enablers

Global propositions

(33)

Reshaping the International & Expats

strategy for continued profitable

growth

Globally coordinated customer insight, marketing and product design, with increasingly localized proposition development

Proposition manufactured by the most appropriate Zurich entity or hub

Increased use of regional hubs, supported by regional distribution

Strengthening of protection product suite for Asia

Significant cost reduction and re-organization In the short term the changes will result in lower than forecast APE from this customer segment …and our response

Drivers that impact our strategy...

Changes in global regulation, accelerated by the global recession …

Global recession has impacted customer attitudes to saving and investing, especially in Asia

… significantly impacting customer confidence and negatively impacting sales

(34)

Source: Association of International Life Offices (AILO), market statistics, internal analyses, translated at actual average f/x rates

We continue to grow our market share in

this profitable customer segment

Offshore life insurance market (excl. US) APE

in USD billions 2003 14% 3.1 2005 13% CAGR +21% 2.0 2006 11% 2004 1.1 1.5 10% 12% 2.8 2007 CAGR +30%

ZIS market share

2008

17%

(35)

Global Life – Corporate Life and Pensions

te Life

Global propositions

Countries

Enablers

(36)

Corporate Life & Pensions pillar provides

an excellent response to market needs

Our strategy…

Development of large case capabilities Development of multinational capabilities Entry into new business lines

Access new geographies

Re Active – use existing Zurich Group Relationships

Pro Active – target specific customers using all Zurich resources Customer Centric Propositions – develop tailored solutions for specific cross-sell opportunities

Globally coordinated relationship management Differentiated approach for distributors

Initial focus on top 5 distributors which control access to 70% of total market

Propositions

Distribution Cross-selling

(37)

Corporate Life & Pensions pillar is already

delivering consistently on its strategy

Launched international pension plan targeted at internationally mobile large employee schemes Launched Group Risk product in the UK

Development of pension capabilities for large schemes progressing on plan

Internal cross-sell network between Corporate Life & Pensions and Global Corporate in place

Expanding the network to Europe General Insurance Already achieved USD 33m APE cross-sell wins in Q1-09 Global relationship with major Employee Benefit

Consultants and local account management in place in Business Units

Relationships delivering major large cases wins and an overall increase in the number of Request for Proposal (RFP) received

Implementation successes

Propositions

Distribution Cross-selling

(38)

Corporate Life and Pensions strategy has

delivered solid APE and NBM

performance to date

Key highlights 2008 Key highlights 2009 Q1-08 Actual Q1-09 Actual

New business APE

in USD millions

Bid and won 6 additional major cases in Q1-09

These 6 cases to make a

significant contribution to APE Exceeded plan by nearly 30% Established a market presence Experienced team set-up to drive growth and develop new propositions

FY07 Actual FY08 Actual

+29% in LC1 New business APE

in USD millions 314 414 102 111 NBM FY08: 16% NBM Q1-09: 19% 1 _{In local currency} +30% in LC1

(39)

Global Life strategy takes a global

approach to key distribution channels

and customer groups

te Life

& Pensions International / Expats

Global propositions

Countries

Enablers

Three global distribution channels to better serve local customer needs

1

Three global customer groups Consolidation of manufacturing and proposition management

2

3

Regional hubs and platforms Proposition management Global desks Purchasing Mutual funds Guarantees In-force management Risk profile Underwriting (Protection) Reinsurance

(40)

Global Life strategy to continue

delivering growth through globalization

Our strategy remains unchanged as we focus on achieving our

aspirations

We are implementing tactical initiatives to respond to economic

markets

Globalization remains central to our strategy as the convergence

of distributor and customer needs continues

The Zurich brand and financial strength underpin our promise to

the customer

We will continue to drive operational efficiencies through our

regional manufacturing hubs

(41)

0.1 0.1 0.7 0.6 1.4 2.1 2.5 4.0 0.1 0.1 0.2 0.4 0.3 0.9 0.6 0.6 0.5 0.9 1.1 ₁ 2.0 0.5 0.8 1.1 0.3 0.4 0.3 1.2 0.75 0.73

Our strategy direction: A truly global life

franchise

Emerging Markets

New Business Value1

in USD billions APE by Pillar in USD billions APE by region in USD billions 2.9 2007 3.3 5.7 2010 Bank Distribution IFA/Brokers Agents Private Banking Client Solutions Corporate Life & Pensions International/ Expats 2007 2010 2007 2010 North America Europe Rest of World 2008 2008 2008

Direct & Central Initiatives

2.9

3.3

5.7

1_{After tax}

(42)

Global Life –

Performance Monitoring

Debra Broek

Global Life Chief Financial Officer Zurich, May 27, 2009

(43)

Agenda

Strategy Execution Update Mario

Greco

Global transformation

Operational execution

Global pillar update

Global Life Performance Monitoring

Debra Broek

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

Summary

(44)

Agenda

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

(45)

Metrics Overview

Profit by source (BOP) Total Expenses BOP RoE NBV and NBM EV operating profit RBRM Profitability and Value Growth Capital/Liquidity Management

APE by Pillar and Line of Business

Net policy holder cash flow

Maturity recapture and persistency

RBC

Cash remittance

Cash flow / BOP profiles over the life cycle of products

Payback periods

Bold = metrics with specific internal targets defined

(46)

We are on a journey

Profitable growth strategy Turnaround phase

Analysis of businesses and sustainability of the business model

Focus on establishing new business measurements European Embedded Value

Reporting of Business Operating Profit (BOP) by geography Monitor the local solvency positions

Current metrics

New business metrics to track the pillar performance for new business and line of business (APE, NBV, NBM)

BOP profit by source including new business strain impact and line of business insights

Active in-force management (IFM) including cash flows and persistency and recapture of maturities

Optimize dividend capacity based on RBC and local capital requirements and regulations

Metrics in progress

Product profitability considering the life cycle capital

needs of products and the impact of the current financial

(47)

Performance measurement is linked to

strategy – pillars and countries

Global distr. channels Global propositions Countries Germany Americas United Kingdom Ireland Spain Emerging Markets Rest of World Switzerland Pillar metrics: APE

New business Value New business Margin

Country metrics:

BOP including Profit by Source Total expenses

Net policyholder cash flows Maturity recapture and persistency

Cash remittance RBC

New Business Value EV operating profit

Bank Dist

ribution

IFA/Brokers Agents Private B

a

n

k

ing Solutions

Corporate Life & Pensions International / Expats

Regional hubs and platforms

Global desks Proposition management

(48)

Performance measurement is linked to

Strategy - Enablers

Regional hubs and platforms Proposition management

Global desks - Purchasing Mutual funds / Guarantees In-force management

Policyholder cash flows Persistency

Maturity recapture Margin management Cash flow profiles Pay back periods

Net risk margin

Germany Americas

United Kingdom

…

Global desks - Risk profile

Underwriting (Protection) / Reinsurance

Investment margin Total expenses Unit costs Ban k Dis trib u tion IF A /B rokers Agen ts Pr iva te Ba nk in g Corp. Li fe & P e n sions International / Ex pats

(49)

Agenda

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

(50)

Total Life Reserves

New Business APE

Global Life business mix 2008

APE compared to in-force reserves reflects the change in strategy

10% 13% 5% 24% 2% 46% Unit-linked Ind. Saving Corporate Life Ind. Protection Ind. Annuity Other 14% 4% 9% 8% 34% 31% Unit-linked Ind. Saving Corporate Life Ind. Protection Ind. Annuity Other

USD 3.3 bn

USD 154.6bn

(51)

Global Life product mix by geography

2008

UL + Individual Saving Corporate Life Individual Protection Other

New Business APE

USD 3.3bn

Total Life Reserves

USD 154.6bn

Total GL Americas UK Germany Switzerland Ireland Spain ZIS Total GL Americas UK Germany Switzerland Ireland Spain ZIS

(52)

New Business Value

10% 13% 16% 23% 9% 29% _20% 28% 5% 29% 9% 9%

Private Banking Client Solutions pillar is scheduled to complete all major set-up measures in first half of ‘09 and plans are underway to enter into European target markets in second half of ‘09

Global Life distribution channel and

proposition mix 2008

New Business APE

Global distribution and proposition pillars drive

new business growth and value

USD 3.3bn

USD 0.753bn

_{Bank Distribution 29%}

IFA/Broker 16%

Agents 40%

Corp. Life &

Pensions 16%

International/

Expats 22%

Direct & central

initiatives 12%

(53)

Agenda

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

(54)

Zurich’s Profit by Source

Business Operating

Profit

Fee income including expense premium

Total expenses

including overhead Net risk margin

Investment margin

Non-insurance

profits / unmodeled

Fund-based fees

Premium, policy-based and other fees

Spread for non unit-linked business Shareholder asset return

+

-+

Analysis of the IFRS business operating profit into components in a

consistent and intuitive way to be able to analyze our profit sources

(55)

Pricing Managed assets Volume in force Operating efficiency + Investment income - Interest credited + Volumes x Fees Volume in force Underwriting / experience Operating efficiency

Invested asset mix Asset return Guaranteed rate Operating efficiency Death/mortality, disability, longevity premiums and benefits

Drivers of source of profits by product

class

Risk margin Investment margin Fees Drivers leading to strategic enablers Examples of actions / insights for our business

Our risk margin reflects stability in experience compared to pricing Our hedging strategy to protect our spread-based business has been effective

The impact on fees of severe market movements is limited as the

majority of our fees are premium-based or fund-based with offsetting fund-based expenses

Sources of profit

(56)

Zurich’s Profit by Source 2008 results

Profit USD 1,480m

Fee income including expense premium

Total Expenses including overhead

Net risk margin

Investment margin

Non-insurance profits / unmodeled business

Fund-based fees

Premium, policy-based and other fees

Spread for non unit-linked business Shareholder asset return

+

-+

3,090 570 770 120 -3,070 30% 70% 20% 80%

(57)

USA

Major country Profit by Source profiles

for 2008

Our focus is on fee-based business and not spread-managed business with the

strategy to increase the risk margin business through our protection team

UK Germany CH Ireland Others Total

BOP 230m 429m 332m 190m 77m 222m 1,480m

Fees Risk margin

Investment margin Expenses

(58)

Benefits of Profit by Source

Profit by Source provides the information to link BOP to other

metrics and drive the business holistically

(59)

Agenda

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

(60)

In-force manager global role established

...implement best practices globally

...improve internal reporting of in-force

management for better decision making

and early warning

...maximize the value of the in-force

business

...support and drive the business to achieve

its targets

(61)

Policyholder cash flows are not created

equal

Product structures drive the cash and BOP profiles Some legacy products (particularly in the UK) were designed to extract fees and profits in the early years

Focus on retention of profitable business

Understanding of the product life cycle is key to control persistency (i.e. when surrender charges expire)

Persistency

Most metrics already anticipate maturities so outflows do not impact the result, however… Maturity outflows do represent a potential recapture opportunity

Maturity recapture

Product specifics

Market drivers

Conversion programs can be used to prevent outflows where industry circumstances change (e.g. tax rules)

(62)

Development of Assets under

Management

1

1 _{Assets under Management (AuM) comprise the Group and unit-linked investments that are included in the Global Life balance sheet plus}

assets that are managed by third parties, for which we earn fees.

2 _{Other includes dividends, charges levied on Assets under Management, and other changes in invested assets.}

Net flows were positive in Q1-09. AuM decreased due to currency

translation and a reduction in the market value of assets.

170.0 180.4 +5.7 -5.2 -5.4 -5.5 180 220 +13 AuM acquired Inflows in USD billions Opening balance Market move-ments & other2 Currency translation Closing balance Outflows +23 -25 -27 -24

FY08

Q1-09

(63)

Net inflows by country in Q1-09

Net flows, Q1 2009

Growth of the new business cash inflows exceeded the outflows of primarily legacy in-force books

Net outflows were less a reflection of the market and more due to the legacy in-force books

Net inflows by country in Q1-09

(64)

In-force management initiatives

Extensive use of Customer Option/Save Teams to retain surrendering business

Monitoring of distributor level and advisor group persistency to proactively manage performance

Persistency

Maturity recapture

Product specifics

Market drivers

Launch of short-term deposit type products to assist in the retention of maturing funds

Providing enhanced management information to agents

Loyalty bonus offer for customers who increase their contributions

Enhanced support of agents and customers to drive completions rate of protection products

Conversion of unit-linked to short-term guarantee products to maintain existing funds

Focused mailings and customer offers for conversion programs to mitigate impacts of regulatory changes

(65)

Proposition management

Unit-linked

Individual

saving

Drivers of the

cash and BOP profiles

Protection

5 - 8 years

5 - 6 years

< 7 years

Split of regular and

single premiums

Investment or Insurance

product classification

Duration of the business

Local policyholder

participation rules

Fee structure, especially

amount of front-end

loaded fees

Economic factors

Indicative cash

(66)

Agenda

Global Life metrics and link to the strategy

Overview of Global Life portfolio

Focus on new performance measurement metrics – Profit by Source

Focus on new performance measurement metrics – In-force Management

(67)

Summary

Clear process to measure the performance of our strategy

Actively manage our profit drivers

Focus on new business, but equally on our business in-force

Continuing to build further business insights and provide more

transparency

(68)

(69)

(70)

Includes PH tax, financial r/i, exceptional items such as significant DAC unlocking, and income from non-insurance entities

Death/mortality-, disability-, longevity-premiums and benefits, the reinsurance result and the policyholder bonuses if the policyholder participates in the risk result Net fee income including the expense

premium, the change in the deferred front end fees and the surrender fees

Spread between investment income and interest credited, the return on free surplus and the policyholder bonuses if the PH

participates in the investment result

Administration and acquisition costs including the change in deferred acquisition costs, the amortization of intangible assets as well as policyholder bonuses if the policyholder participates in the expense margin

Zurich’s Profit by Source - Definitions

Profit

Fee income incl. expense premium

Total expenses including overhead Net risk margin

Investment margin

Non-ins. profits and unmodeled