Zurich Insurance : Full Year Report 2022

News Release

February 9, 2023

Ad hoc announcement pursuant to Art. 53 of the Listing Rules

Zurich delivers highest profits since 2007, proposes dividend increase to CHF 24 per share

• Group business operating profit (BOP) rises 12% to USD 6.5 billion, the highest since 2007
• All financial targets of 2020-2022 cycle exceeded, with earnings per share adjusted for the impact of H2-22 loss on disposals1
• Proposed dividend increase of 9% to CHF 24 per share
• Property and Casualty (P&C) BOP rises 14% to USD 3.6 billion; P&C combined ratio stable at 94.3% driven by continued improvement in commercial margins
• Life BOP grows 8% to USD 2.0 billion, with lower capital intensity after the execution of back book sale
• Farmers BOP up 18% to USD 1.9 billion; Farmers Exchanges2 gross written premiums (GWP) up 9%, benefiting from the MetLife integration
• Customer loyalty significantly improved during the last three years; 2.1 million net new retail customers in 20223
• Very strong capital position with Swiss Solvency Test (SST)4 ratio at 265%

Zurich Insurance Group (Zurich) reported very strong profits for the full year 2022, with the highest business operating profit (BOP) since 2007. The year 2022 ended the second three-year financial cycle of the strategy to transform Zurich into a simpler, more innovative and customer-centric organization.

Group Chief Executive Officer Mario Greco said: "We have exceeded our financial targets for the second consecutive three-year period. These were tough years with unexpected challenges during which we had to stay very agile and focused on our goals. We continued to execute our strategy with strong discipline and successfully drove our results to deliver the targets. I would like to thank all my colleagues, our customers and our partners for this remarkable achievement.

"The P&C business reports today an excellent combined ratio and more importantly shows double digit top-line growth. Higher risk-adjusted prices in commercial insurance and continued measured progress towards our growth ambitions took P&C gross written premiums to a record level.

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"The Life business achieved the highest profits ever, with a very light capital consumption. Our balance sheet remains excellent, especially as we progress with the sale of Life back books in Europe. This, together with our strong operating results, has allowed us to propose a 9% increase in the dividend per share to CHF 24.

"In November, we presented our new financial targets and raised our ambitions for the next three years. Over the period 2023-2025, we will accelerate the execution of our customer-centered strategy by further extending the application of data analytics throughout the Group and by accelerating digital innovation.

"The combination of continued margin improvement in our commercial business, improving trends in retail and our ability to grow across all our businesses supports the Group's higher financial ambition for the 2023-2025 cycle."

Select financial highlights (unaudited)

(For a more comprehensive set of financial highlights see page 10)

in USD millions, for the 12 months ended December 31			Change
unless otherwise stated	2022	2021	in USD5
Business operating profit (BOP)	6,451	5,742	12%
Net income after tax attributable to shareholders (NIAS)	4,603	5,202	(12%)
Business operating profit (after tax) return on common	15.7%	14.0%	1.7pts
shareholders' equity (BOPAT ROE)

Financial targets 2020-2022 (unaudited)

			Target
Business operating profit (after tax) return on common shareholders' equity	15.7%	>14%
(BOPAT ROE) for the full year 2022
Cash remittances (in USD billion, cumulative to full year 2022)	12.4	>11.5
Earnings per share growth (FY-19 to FY-22 compound annual growth rate in USD)		≥5%
•	Adjusted1	5.1%
•	Diluted	3.6%
Swiss Solvency Test4 ratio as at January 1, 2023	265%	≥160%

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Full year 2022 BOP was USD 6.5 billion, an increase of 12% compared with

USD 5.7 billion in 2021, with improvement across almost all operating segments. This led to a business operating profit after tax return on equity (BOPAT ROE) of 15.7%, the highest since 2009, and well above the 2020-2022 target of >14%.

Net income after tax attributable to shareholders was USD 4.6 billion, a decrease

of 12% compared with the prior-year period. This was mainly driven by a lower level of capital gains, net losses on divestment of businesses and hyperinflation charges related to the Latin American business, which more than offset the higher level of BOP. This led to earnings per share (EPS) of USD 30.8 on a fully diluted basis. Adjusted for the one-off impact of the USD 260 million loss on disposals incurred in the second half of 2022, mainly driven by the sale of the Italian legacy life back book, EPS was USD 32.2, corresponding to a 5.1% compound annual growth rate compared with the year 2019.

Cash remittances of USD 12.4 billion in the 2020-2022 period on a cumulative basis were well above the target of >USD 11.5 billion. The Group's SST4 ratio was estimated at 265%, well in excess of the Group's target for an SST ratio of 160% or above.

Customer focus delivering results

Throughout 2022, the Group continued to advance its customer-focused strategy, increasing the use of data insights to improve their experience. This is reflected in higher customer satisfaction and loyalty across the retail business, with the retention rate up 2 percentage points to 82% and 5.7 million net new customers added3 over the last three years. This supported strong top-line growth with retail and SME gross written premiums up 13% on a like-for-like6 basis in 2022.

In the commercial business, demand from customers for dedicated services around current and emerging risks, including climate change, has helped make recently created Zurich Resilience Solutions one of the Group's fastest growing businesses.

Technology is playing a critical role in Zurich's ambition to be a provider of choice. In 2022, Zurich created a global digital platform that enables faster integration and more efficient collaboration with commercial customers and partners.

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Responsible and impactful

Zurich made further progress in 2022 toward its ambition to be one of the most responsible and impactful businesses in the world and was awarded the highest environmental, social and governance (ESG) rating from MSCI and CDP. A key part of the goal is supporting a sustainable transition to net-zero emissions by addressing every lever available: reducing emissions in the Group's own operations, and working together with customers and companies that Zurich invests in.

Zurich is taking bold action to cut its own emissions. By the end of 2022, the Group had, among other measures, met its target of switching fully to renewable power worldwide and was on track to reduce air travel emissions by 70% compared with pre-pandemic levels7. The progress allowed Zurich to bring forward its target to achieve net-zero in its operations by 20 years to 2030.

Zurich continued to expand its customer offering of solutions designed to generate positive environmental or social impacts or contribute to mitigating climate risk. During the year, revenues from these sustainable activities doubled to USD 566 million.

In its investment portfolio, Zurich reduced the emissions (CO2e) intensity of corporate investments by 12% in 2022 versus the 2019 baseline, following progress by investee companies on their path toward net-zero emissions. The Group's target is a 25% reduction by 2025.

Beyond the climate crisis, another priority is to help employees to be equipped for the future. The Group's focus on reskilling and upskilling its workforce resulted in an increase in the proportion of internal hires by 3 percentage points to 71% in 2022. Diversity efforts are paying off with more women serving in senior roles, with female representation in senior management8 increasing by 2 percentage points to 29%.

Supporting communities

Throughout the year, Zurich and the Z Zurich Foundation9 have provided humanitarian aid to the victims of the war in Ukraine. They raised CHF 2 million in the first months of the war and in June, Zurich delivered more than 200 tons of food aid to Kharkiv.

Zurich exited the Russian market in July 2022 when it sold its business in the country to 11 members of the unit's team.

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Business performance

Property & Casualty

				Change
in USD millions, for the 12 months ended December 31			Change	like-for-
unless otherwise stated	2022	2021	in USD5	like5,6
P&C gross written premiums and policy fees	43,335	40,123	8%	14%
P&C business operating profit (BOP)	3,554	3,121	14%	19%
P&C combined ratio	94.3%	94.3%	0.0pts

• Property & Casualty (P&C) BOP up 14% to USD 3,554 million, driven by further top-line growth while maintaining a strong combined ratio

BOP of USD 3,554 million was 14% higher than in the previous year. The result benefited from a record level of premiums and a strong combined ratio of 94.3% in line with the previous-year period. Lower catastrophe and weather-related claims were partially offset by the inflationary environment experienced within the retail and SME business in the second half of 2022, in particular within the motor business, while commercial insurance continued to benefit from higher earned rate and margin expansion. Excluding crop insurance, the combined ratio improved 0.5 percentage points year over year, driven by a 3.0 percentage points improvement in the commercial insurance combined ratio compared with the prior period.

Gross written premiums grew 14% on a like-for-like6 basis, adjusting for currency movements, with growth in both retail and commercial insurance across all regions. In the Europe, Middle East and Africa (EMEA) region, growth was driven by a combination of rate increases, higher retention and improved new business. North America continued to benefit from higher commercial insurance prices, as well as rising agricultural commodity prices driving top-line growth in crop insurance. Asia Pacific saw a strong recovery in the travel insurance business and overall growth across the region. Latin America returned to growth with a strong performance in Brazil supported by a rebound from lower levels in the previous year due to COVID-19. In U.S. dollars, the Group's P&C gross written premiums rose 8%, reflecting unfavorable currency movements.

The Group achieved price increases of about 6% in the year, supported by a commercial insurance rate change of 8%.