Good morning, everyone, and welcome to Zurich Insurance Group's 2022 Investor Day, where we're excited to set out our ambitions for the next strategic cycle. Welcome to those on the webcast, and a particular welcome to everyone here at the Zurich Development Center for what's our first in-person Investor Day since 2019. Through the day, we're gonna start off with Mario Greco, our Group CEO. He will be followed by Conny Kalcher, our Group Chief Customer Officer. After lunch, we've got Sierra Signorelli, our CEO of Commercial Insurance. She will present, followed by George Quinn, our Group CFO. Following a short break, there'll be opportunity to answer questions, followed by closing remarks from Mario. If everyone could put their devices on silent in the room, that'd be much appreciated.
With that, we'll kick off with a short video before Mario starts the day. Thank you.
In 1872, near the banks of Lake Zurich, we began as a startup with a big idea and a can-do spirit. Over the past 150 years, history has thrown a lot our way, from wars to revolutions, from stock market crashes to pandemics and natural disasters. In that time, we've seen the world evolve from horse carriages to spacecraft, from the telegraph to text and tweets, from IT to AI. As society around us has changed radically, we at Zurich-
Have constantly adapted. By listening, connecting, and by being quick on our feet. From the Americas to Australia. From the Nordics to the Emirates.
Across the globe, our people are empowered to do the right thing.
With empathy and a smile.
Our customers trust us to advise, protect, and help them navigate this complex world, anticipating challenges while avoiding and minimizing losses.
If things do go wrong, we're there, helping to rebuild lives, businesses and communities.
We continue to press ahead to become more digital.
More innovative.
All while we help society transition to a healthy, resilient and sustainable future.
This has taken hard work.
Dedication.
Agility. Courage. Always striving to be better.
Helping businesses, families and communities prosper and grow.
Yes, we are an insurance company. We know that.
We don't have lots of bells or whistles or catchy jingles. We have something more important. We have your back. We have your back. We have your back. We have your back.
We have your back.
Like we've had your back for the past 150 years, proving that we can respond to and overcome challenges. We'll be here, as we always have, with confidence in the future and in the extraordinary people who make this company. Let's start writing our next 150-year history.
Together.
All right. Good morning. First of all, good morning to everyone who is on the webcast, but a special good morning and thank you for the people here in the room. It is so good to see ourselves again in person and as human beings. That's so important. Thank you for coming over, and thank you for being with us. Now, I was told that this doesn't work, but, I'm an optimistic guy and I will try to set the pace of my presentation with this one, and hopefully it will work. The first one did work. Allow me to start by giving you a little bit of perspective of where we are today. This is the third time that we've presented three-year plan to all of you.
You probably remember what the first plan was, and then at the end of 2019, we went into the second plan presentation a few days after the pandemic started. Frankly, the plan became crap as it was. We work a year very hard in making the plan bottom up, and something completely unexpected, and especially unknown in the way it would develop, made that plan useless. Here we are today, still confident that we will exceed the targets with a very different set of actions. Now, we're extremely resilient. We're extremely agile. We can respond very quickly to conditions. The plan that we're presenting today to you doesn't have a guarantee that things will not happen. They will happen, right? We don't know precisely what's gonna surprise us over the next years.
You can be sure that we will respond with the same agility and confidence and trust in the management capabilities we have and adjust it to deliver the targets. Now, the other thing important to bear in mind to understand today is that we have a strategy. We're in a journey, which is the same journey fixed in 2016. I will quickly illustrate to you again what was the journey. Through all the bumps of the last seven years, we have been developing this journey and implementing the strategy step by step. The strategy is based on turning the company into a customer service organization. Back seven years ago, we thought that the great strength that Zurich had, the great differentiation, was the customer service that Zurich was delivering in the commercial space.
That was really the key to understand what was the difference between Zurich and the other company. It was the customer approach, the customer relationship, the customer care that we used to have since years ago in the commercial space. We said, "Let's be the company that can change the industry by applying completely different standard of services to customers, and let's apply all through our businesses, especially in the retail business, where we did not play at the same level at all." The second concept, which has been guiding us all through these seven years, is reduce volatility. We don't want the business to be volatile. We understand why you guys invest on us, right? In order to deliver what you expect from us, we need to control the P&L, we need to control the balance sheet carefully.
Over the years, you saw us taking actions continuously in order to reduce the volatility. We're not maximizing the profits. We are reducing the volatility and then taking the profits as high as we can. Again, this is what is governing also this plan. This is what is really embedded in the plan. On ESG and our sustainability position, from the beginning, we took it extremely seriously. I mean, sustainability is something that we experience every day. We see the climate changing, right? We cannot be in denial of that. Now, for us, this, however, has a broader sense. It's not just the E. We care about the S, we care about the G, and we'll continue being a very innovative company on ESG action. This is embedded in everything we do, and it's all three letters that matter for us.
The targets that you already saw, they're very ambitious. However, let me just make a clarification at the beginning. They are IFRS 17 defined. As George, with his trademark waterfall, will show later, there is a difference between IFRS 4 and IFRS 17, and so part of the distance between today and 2025 will be in the redefinition of accounting. They remain extremely ambitious, but they represent and it's another step forward in really realizing the potential of this organization. With that, let me go back on what we're still aiming to conclude. Today, we still have four targets outstanding, right? We have a BOPAT ROE in excess of 14%. We have an EPS growth in excess of 5%.
We have an SST ratio of in excess of 160%, and we have cash remittances in excess of CHF 11.5 billion. These are the outstanding targets until the end of this year. Now, we're quite confident that by year-end, we will exceed all these four targets. What have we done in the last three years, and what we think has been achieved or accomplished over the last three years? Now, on commercial, I think in the last three years, no matter how rough it was for us, the business, we, I think we have reestablished ourselves as a credible leader in commercial. Our combined ratio, and I'll show the numbers, and Sierra will come back to this later, is really now a benchmark in the market.
The portfolios that we promised, if you remember in 2016, that will be changed for better portfolios are now much better portfolios, and we started preparing ourselves for different market conditions. We're very pleased with where we are. What remains to be done? I'll come back to this. We need to grow mid-market. We have an ambition to grow mid-market much stronger and much better. Sierra built over the last years a huge data platform that you will see a glimpse of it later in her presentation. That's a powerful tool which we started using, and we will become better and better, and we will keep leveraging of it on it over the next years. A lot of the credibility gap that we had in commercial has been fixed.
On retail has been probably our biggest construction work area. We were not in retail at all when we used to be in commercial. We took it very seriously. Farmers, the European businesses, the South American businesses. What have we achieved? We have achieved that some countries, especially Switzerland and Germany, have been growing above market rates. They've been recapturing market share in these markets. Profitability has been quite good, but especially we have built the foundations that then Conny will explain on how to further develop the customer journey. As we have started measuring what is this for.
Because the thing that I really want you to understand is that all our customer journey retail is not for fun. Although there is really a lot of fun in doing it, and it's not because it is politically correct, it's right to do it, although, of course, it is right to do it to serve the customers. It is really because it is profitable. It makes money, it changes the ball, right? The fact that we have more retention higher by 3 percentage points, which is something equal to 2 million customers staying with us longer, that's a huge value that we have created by understanding the customers, understanding how to treat them, and understanding what we can deliver to them. Conny will build on that later, but this again is one of the tractions that we have for the next three years. Life, of course, the back books.
I mean, the efficiency of capital in life is completely different after the transaction or will be different after the transaction, but this remains an excellent growth business with our life portfolios. The products that we sell are incredibly efficient and are incredibly useful to the customers, and we plan to continue growing it. Farmers. Farmers is super important for us. Farmers has been, again, under a lot of changes. The latest changes were management changes, where we appointed a new young CEO, highly energized to drive this next phase for Farmers. Farmers is today much better prepared, and this is why we expect now Farmers to grow more than double the growth rate of the past years over this next cycle. Now, we have been rewarded for this, no doubts about it.
We were pleased with that. Total shareholder return was clearly in excess of peers, in excess of the markets. But in fairness also, we've been rewarding shareholders at the same time with the strong growth of our earnings per share. We had one of the probably most generous payout ratios in the industry. Yes, the market has recognized it, but continuing to deliver in excess will keep us able to deliver in excess of the rest of the market. Okay. Now, that was the past, but let's start moving into what is the next three-year plan and how we think to achieve it. First of all, the vision behind it stays the same.
We are a company on a mission, and the mission that we want to establish is to be the most customer-oriented service company in the insurance space. We want to innovate on the relationship with the customers and in the service to the customers. All the things that we do tend in that direction. Anticipating something we'll talk later, for us, digital is extremely important. You saw there the investments we made in people, in skills, bringing totally new people into the business. But digital works hand-in-hand with Conny. Digital is not a business per se. We don't have any pleasure in making application. We only do the things that pay off to the customers, that will give customers value. Our business has been extremely balanced over the next years, and will remain so. Of course, property and casualty is the biggest component we have.
Farmers, and this is an average of the last five years, Farmers has been 1/3, and the life business has been just short of another 1/3 of the business. An extremely well-balanced profile of business with a very strong cash conversion. This is again, it's the average of the past five years, and don't expect that this is gonna be much different in the next years. You see Farmers delivering everything back, and property and casualty pretty much so, and life a little less, but still very high cash conversion. I don't speak about the capital because I think you all know our position on capital. Now, who are we and what I've been trying to change in the business to become this customer-oriented company that our strategy indicated we want to be.
First of all, we are a global company like nobody else. Now, global means very good things. It means that our business is balanced and it's very much diversified across U.S., Europe, and then South America and Asia. That's a very good thing. But when it comes to retail, it gives challenges because we badly need to build global platforms. Otherwise, if you're global, the risk is that you become unproductive and inefficient. Think about what we did some years ago, that we introduced a new responsibility for global ventures because we really want to push the global standardization of retail over global platforms, that's a key element of our vision for the future, especially in retail. We have a unique representation of distribution channel.
Not really in commercial, well, as you expect, the great majority of our sales are through brokers, which is what you would expect. However, if you move to retail and life, it's quite unusual how we distribute these products, and this has been a strength of Zurich for years. In retail, we have a very strong contribution by partnerships. Now, we strongly believe in partnership, and I'll come back to this, and I have a slide in a second. I know you guys will be skeptic about it, but this has been a driving force for us over the past years, and it will be even better in the next years. In life, 40% of our sales come from bank assurance. We have been building the skills in bank assurance as we build the skills in partnership over the years. This is not a short-term journey.
It's a long-term journey where we became better and better, and also we picked partners who are better and better in working with us. Now, let me just have one quick passage through commercial insurance because Sierra would say much more and much better, just after the lunch break. You remember in 2016 we said we need to achieve different portfolios. That was driven by the need to damp down volatility. The portfolio we had at the time were biased towards casualty, right? We said there is too much long tail. You cannot manage volatility this way. You can't achieve, you know, mid-90s, low 90s combined ratio with those portfolios. We need to change the portfolios. We did that. The portfolios we have today are very different, and they enjoy a completely different combined ratio.
Of course, it wasn't just the portfolios. It was also the underwriting instruction, the underwriting discipline, the data that we built over time and we gave to the underwriters to manage the business. It has been a complete shift over the years, progressively, piece by piece, as you see here in the middle. Today, we're pretty happy with the portfolios. However, there is still an area of development for us in the next three years. We want to grow mid-market. If you remember what we said in 2016, we said two things. Portfolios are too much skewed towards long tail, and there is too much skewness towards big accounts, right? There is nothing bad about long tail, nothing bad about big accounts, but there is a lot bad about having such a big bias. We wanted to fix these two bias.
One, we feel good about where we are today, the balance between the short and long tail. The other one, we still need to make progress, and it takes longer, as we discussed many times, because growing mid-market requires building different organization, different infrastructures on the ground, which we have done, which we are doing. There is still more to come in the next three years. The work we've done also with the brokers, this has been extremely focused. We have restarted, starting seven years ago, meeting the brokers regularly, and we still have potential, but the progress has been impressive. We have grown with the global brokers. We have grown our share with the regional brokers. We have grown in share of wallet, and we still see, you know, the work ahead of us, and we'll still see what's the further potential.
A lot has been moved over the past six years, and Sierra will touch upon all these points. Commercial is in a very good shape, is prepared. There is further work to do. The mid-market will drive the growth over the next years. The margins will stay flat or similar to what they are today. We do not expect to worsen our profitability in commercial, and we will keep using our tools and our data to grow the business and protect the margins. Let me move out to now the other businesses, which are often less known and less discussed, and they are a driver of our next three years. Retail, first of all. Now, what is retail for us? Excuse me. The first observation, which is important to understand, is that our retail business is fairly concentrated.
Our retail business is fundamentally made of four different units, Farmers, Switzerland, Germany, and the partnerships. The rest, which is 20% of the total, is fragmented with some business growing strongly. They will probably become relevant at the end of the next three years, like South America, especially Brazil. The rest of it is pretty fragmented. Yes, we hope that one day Indonesia will have a big part of it, but still, the numbers today is we need to work on these four business. This is what we've done. Over the last three years, we have meticulously focused on these four business. Now, Switzerland, for example, Switzerland there, we've been investing heavily in digital solutions for the agents. We have been investing in new products. Now, look at the markets. We have outgrown the market in Switzerland. We have recuperated market share.
Profitability has been kept extremely high. It's a market where clearly the investments have been remunerating us back. This is also where Conny brought the new customer approach, the profiling to the customer, the customer segmentation. And so, Switzerland has been the first one to experience what is the benefit if we go selectively addressing the customer needs. Germany, similar story. A little different, Germany was the second one where Conny introduced the new customers approach. Germany is much more about the SMEs and the mid-market, but again, growing above the market rate, recuperating market share, growing the profits. A great story for us that it can be done and it can be done successfully.
I'll talk, Farmers requires a specific chapter, so I'll come to them later. Partnerships. Partnerships have been growing strongly. Now, first of all, what's the definition? What are partnerships? Partnership for us mean fundamentally two things. It means banks, big partners like banks or other. It could be technology companies or media companies, or affinities, right? This is the definition that we give to partnership. Now, again, we grew double-digit the business over the past years, very profitably and with a lot of further growth embedded. This is what our retail franchise is. Now, if you move to what have we done? How have we created this growth? What has Conny pushed into the business through these years? We started. Again, think about this really as a long journey where we have been very loyal to the idea, and then step by step, we've been adding pieces, right?
It's like where you have a big puzzle and you keep adding pieces, one day after the other. We need to create a common basis at the beginning. This is what the net promoter score is. We needed to have a basis, so we created a standard. Back in 2019, we were able to start comparing, to start measuring because we got the standard right. Everybody had the same measure, everybody had the same system, and everybody was just collecting the data in the same way. Since then, we grew 8 points in customer satisfaction. Similarly, on brand, we started measuring the brand in the same way. We started comparing the brand recognition among our peers and with the market. We grew 7 points in brand consideration, right? Year after year, day after day. What does this mean?
It means 4.5 million customers so far in three years. Now, that's the size of midsize company, right? That's relevant. Out of this number, and then again, Conny will explain it better, but I just want this to be 100% clear. Part of this has been improvement in retention.W e gained 3 points in retention. Retention means loyalty. It means that less customers have leaked out, right? 3 points of retention is a number as big as roughly 2 million customers who have been staying with us. Now, in a profitable business where you make money with the customers, keeping 2 million customers with us, it means a lot of money. It's a lot of value, right? It's customer acquisition, but at the same time, is retention. It's a very complex set of actions.
Again, Conny will go into this, and will explain it. Progressively, we've been delivering this through the countries. Again, think about that over the past three years with pandemic, with lockdown, with all the challenges that you can imagine, but we kept going and we kept making this happening. Now, if I speak about partnership, I know that there is often suspicion about that. What is it? How stable is that? First of all, this is sizable for us. You know, I said that before, it's roughly 20% of our retail sales. Please note also that we are not that dependent on agents. Agents are 40%.
I'm saying this because frankly speaking, we care for agents and we invest, and we try to defend and develop them as much as possible. The future is somewhere else. The future is in digital interaction with the retail customers. The future is in partnerships and in other means of contact with the customers. What does the partnership mean? I mean, we do have criteria for partnerships, and we do select also the partners with those criteria. We're data-driven. We wanna work with partners who are equally data-driven. Customer service is not based on fantasy, it's based on data. If the partners don't have the capacity to use and generate the data that we need, we cannot work with them. Second, customer service is a culture.
We will not work with partners who do not have the same culture we have. We want to select partners with the same level of ambition and passion that we have for that. We want exclusivity from partners, and we want to have a multi-year relationship because you don't change much in a short period of time with customers. You need time to do things, and we have experience for that. What we offer them is dedicated teams, dedicated experienced people on dealing with the partnerships and our data, our systems, our capability. There, I'll come to this on the digital, we made significant progress on being able to work digitally and simply with the partners. It's a big market. It's a huge market.
We estimate this in $200 billion market. This is where we're quite confident that we will keep growing this market over the next years and keep enjoying good results out of it. Digital. I mentioned this a couple of times before. Again, frame it as this is one of the levers that are part of the package to the customers. Digital is not only for retail. I mentioned before that Ericson Chan and his team work very closely with Conny, but equally, they work very closely with Sierra. Probably Sierra is an even bigger client than Conny is for digital. Now, oh, sorry. No, I'm wrong because I skipped a page, and that's Cover-More. Let me just go on digital, and then I come back on Cover-More for a second.
Digital is the way to deliver the service to the customer. What we did is we developed a number of solutions. The most important latest development was developing a platform for API, which is seamless connectivity with the partners. In commercial insurance, we have the same kind of solutions. I mean, customers like Maersk, you know, they benefit from the fact that we can offer a seamless platform for solutions that works globally, that is completely integrated with themselves and their customers. Think about digital not as a standalone thing. We're not proud of any single piece of application. We don't want to come to you and present a very nice tool. This is part of the journey that we drive to the customers, and this is part of the service that we bring to the customers.
Now, let me go back now to travel. Travel has been very important from the beginning. You remember that we acquired Cover-More in 2016. Cover-More has been growing. We made a number of acquisitions, so we created it as a global platform. It became the second biggest, and then COVID came. Clearly, they were badly hit by COVID. So what we did is we told them, "Okay, prepare for after COVID." We kept investing. We kept developing the application capabilities, the service capabilities. We kept growing the online capabilities that they have to follow the customers. This year, they're back to profits. This is the second best year for them already. Next year is gonna be the best ever. We strongly believe that this is a very necessary component of the customer solutions to individuals and to commercial customers.
We think they're much better today than they were before COVID to deliver the service to the customers. They've been making an excellent use of their time while in lockdown. Life now. I'm moving out of the retail space, property and casualty, and moving to life. Now, again, what is first of all the composition of our distribution in life? Because this also is quite unique. You see how much we do with banks, how important banks are. Corporate life and pension is a business that I still remember we launched in 2008. Has grown today to be 1/3 of our sales. It's a completely greenfield development. Then the more traditional channels, the ones that everybody's using, IFAs and brokers and tied agents. The banking business has been incredibly successful, even during the COVID times.
This is a business that has very well remunerated us. I mean, 10 days ago, so I was in Barcelona. Next year, we're gonna be 15 years of the agreement with Bank Sabadell. That business has delivered in excess of our plans and their plans for our benefits of the joint organization and the customers over 15 years. We have more than 20 million customers with these two Spanish banks. Deutsche Bank has restarted growing, and we're very pleased with that. We see that business coming back as a successful business already. We'll keep investing in distribution. We will keep investing also in health solution linked to protection. On unit link, we've been very innovative, providing customers with a green solution, with sustainable solution, first in the market with great success.
Now, on the product side, I mentioned before, we're very light on products in terms of capital consumptions. You know that. I mean, we abandoned the guaranteed business some years ago. We have been selling some of the back books that we kept having. The BOP growth, we think it's frankly best in class over the past five years. That's an average of the last years. In terms of profit ambitions, we're very confident that over the next three years, life will remain with a mid-single-digit growth business. Life is very different now under IFRS 17 with the CSM development. We think it will be more predictable maybe than in the past, and we expect mid-single-digit growth for the next years. Now Farmers.
Farmers, as I said, is a super important business. It's more than half of our retail business has been important for our cash and liquidity targets, but has been growing not enough. Why was that? We were late in reorganizing the agencies, but then we did it. We completely reconstructed the agency organization, the captive agent, the exclusive agents. We felt that there was a limitation in the available distribution channel to Farmers, and so two years ago, in the middle of the pandemic, we went, I would say bravely, into an acquisition there. We acquired the MetLife portfolio, which gave us independent agents and gave us the worksite management, the employee platforms.
What they have today is a variety of distribution channels, which was very important for us because we felt a vulnerability on them having only captive agents. We also improved on the system side. We created online solutions. We finally changed the management to get a totally new traction. What we expect today from Farmers is a much higher rate of growth. We think that they'll be able to achieve between 3% and 5% rate of growth per year. In the last two years, they have been exceeding that. Definitely they have support from the pricing situation in the market, but also now they're much more capable of pursuing the opportunities in the market. The geographic issue that you guys have raised to me so many times is fixed. Now, Farmers is a national player. It's everywhere.
They don't have to invest in conquering and opening new states. They just have now to start delivering. The 7% margin is unchanged. We care a lot for Farmers. I spend a lot of time there. We are confident that the next three years will be good for them. Sustainability. For us, this is really three layers. Of course, we're committed to the part of it, especially to help the customers in the transition. Sierra had to take some underwriting decision, meaning that we did not confirm underwriting to some clients. Honestly, we hate that. We hate doing this. We do it only when it is really necessary. It doesn't do much good because they find another insurance company. We'd rather want to work with the customers to transform them.
Zurich Resilience Services has been one of the best innovative solutions we've brought to the market over the past years. It's been growing a lot, has been growing fast, and it's very high in customer consideration and in customer appreciation. We'll keep investing on that. We'll keep working together with the customers in speeding up the transition. Of course, we will continue shrinking our exposure to fossil fuels, especially when and if we don't see commitments by the customers to do that themselves. Then we will continue to take the possibility of opting out. For us, you know, sustainability is a much broader thing. We work with communities, we take a stand, we take a position on many different aspects, and we care for the people, for labor, for our employees.
For us, it was important also to see a strong improvement in the employee satisfaction. For the next three years, there are a number of commitments or sub targets or targets which are maybe not relevant for you, but very relevant for our business that we want to consider. We want to continue growing our internal people. We set for ourselves targets on how many open positions will be filled in the future with internal placement and not going to the market. We continue working also on expanding our investment to sustainability, and we want to increase the impact investment funds to 5% of the proprietary assets. We'll continue also to look at the share of revenues which are generated from sustainable solutions.
Now, there is a lot of discussion on what is that, how you define it. Now, honestly, given that there is no accepted market definition of it, we took our definition. We define what we think, which is a fair and strict definition of what is a sustainable revenue, and then we start measuring it, and we give business commitments and targets to grow the sustainable revenues year after years. This is very, very important.
Now, there will be a specific day when we want to talk of this in March next year, and I hope that you will be interested and you will come and listen and we will present a different part of the company or better, not a different, but a very specific part of the company, which is how to read our actions and our numbers through the sustainability lens and through the ESG values. Now, let me start to go to the closing of my presentation. How do we plan to improve the BOPAT ROE? Fundamentally, we plan to act on the simple levers that we've experienced over the past years. We wanna grow the business. As I said, the growth is gonna be primarily in property and casualty.
It will be in the mid-market space of commercial. It will be in retail because we expect a rebound of the retail market. It will be at Farmers. Life will continue to grow as it did in the past, and we will grow the margins. The margins will start coming back in retail. Retail has been suffering over the past two years. We have a much better forecast for the next three years for retail, and they will hold on in commercial. In Life, equally we'll maintain the margins over the next years. We plan to grow still productivity. This is still an industry that it's not as efficient as it should. So over the in all these numbers that you see here, you would see them again in George board for later. This is on ROE terms.
This is the contribution of growth, margins and productivity in terms of ROE, so it's not EPS growth. Productivity is important for us. We plan to take advantage of the investments that we have made in technology, in digital. We can be more efficient than we have been in the past. We will continue simplifying the organization. We have run a sequence of waves of simplification. We'll continue doing that. We are aware that in order to win in the market as we want to do, we need to be more productive and efficient than we are today. This is what's fundamentally driving, and then my colleagues will expand on this and will present more details on how we wanna do it. What are the targets? BOP ROE, BOPAT ROE in excess of 20%.
IFRS 17 basis, George will drive you from today to this number. It's a significant growth, but it's not a crazy number as it can look like when you see an insurance company above 20%. We still think that by 2025 we will probably be the most profitable company among the insurance world. It's a number that we're confident we'll get there. EPS growth at 8% per year. Solvency, we remain committed to manage the SST above 160% and never run into troubles with our capital position. The cash remittances at CHF 13.5 billion this time with pretty much the same cash deliveries from the businesses that you saw from us in the past.
Before I pass it over to Conny, let me just add a few conclusions to this. This is an ambitious plan, but out of a journey where progressively during the journey, we have turned every stone we found in the business. There are still other stones to be turned around. We kept investing in the business, preparing for the next wave, and we will do the same over the next three years. We will then prepare for the next plan after, and we will continue to generate value out of this franchise. This is an incredibly rich franchise.
If you look at the retail numbers, if you look at the commercial capabilities we have today, if you think about what I said on partnership in Life, that's in no way and sense, you know, the maximum that we can achieve. The second thing is that I want to flag to you right now is that we know what to do. We have been through tough times. We have delivered. We have managed. The management team has been very stable. We're very, very well equipped to face whatever is gonna happen over the next years. All right. Customers now, the fun part. The right one.
Thank you.
Thanks, Conny.
Good morning, everyone. I'm really pleased to share with you the story about how we are delighting and loyalizing customers at Zurich. Since we were together last time, we have been driving this agenda over the last three years. In this presentation, I'll take you through what have we done so far and what are we planning to do over the next strategic cycle. As you know, customer focus is one of three strategic priority areas in our corporate strategy. It's important. You could also hear in Mario's presentation that it's a really important subject for us. The problem is you can't just say to an organization, "Be customer-focused." What does that mean? How am I going to do that? In order to do so, you really have to come up with a compelling vision.
You need to set standards, create new processes, drive projects that changes the mindset and makes everyone want to behave in a different way. Once you've done that, you need to set up some targets for how to get there and, of course, measure and reward everyone in the organization when they're driving in the right direction. This is really the philosophy behind what we are doing and what we are sharing with you today. I'm very, very pleased to say that we are already seeing progress. We can see that this is working. We have gained 4.6 million net new customers. They are happier, they're more satisfied, and we're also growing the relevance with them. We have refreshed our brand purpose.
We've been around for 150 years, so from time to time, of course you need to refresh who you are, how you speak, in order to stay relevant with customers. We have also created a CX vision, actually talking about creating a meaningful relationship with our customers. It's not, it's not just about a transaction, it's about making every interaction count, and building that loyalty with them. The priority for the next strategic phase will be driving customer loyalty, delivering relevant experiences to our customers in a way that they can feel the difference to who we are and what we want to deliver. To do that, we're introducing customer segmentation, lead management, and also a new direct portal for our customers where we can engage with them directly.
Of course, it's important to track the progress so that we know how well we are doing, and we continue to track customer KPIs. We will also introduce new ways of thinking about loyalty in the future that links stronger to our financial performance. This is the plan that we've been going through. We started with redefining our customer strategy. We created a fresh, new engaging purpose, creating a brighter future together with our customers. Together is a key word. It's not customers over here, Zurich over there, it's us achieving something together. We also created a new and more engaging customer value proposition, adding in emotional benefits to our customers. Not only thinking about, yeah, we need to do good products, we need to have a solid underwriting process, but also really thinking about how we can connect with them emotionally going forward.
As you know, any brand today, it's not enough to be connecting with them on the product level. It needs to be the whole experience, and the more we connect with the heart and their emotions, the more successful we will be. Finally, we redefined our brand visual identity. That's the brand, it's the colors, et cetera, and made it more relatable to customers of today, and also more able to perform in a digital environment. Once we'd done all of that, we moved on to look at the customer experience. Isn't that a fad word, customer experience? For customers, it's real. Customer used to be about products, okay? I'm buying this product from this supplier because it's a high quality product. That's not the case anymore. It's the whole experience. It's the service, it's the sales process, it's everything you get from your provider that you're measuring.
We created a vision for our customer experience, which is to create a meaningful relationship, not just a transaction, but a way of engaging directly with our customers. We set standards. To make it more tangible for the organization, we actually define what should our CX be across all markets when the customers are meeting us. That we have now measured how good are we at that, and what is the gap we need to fill in order to get up to the standard where we want to be. We looked at how we do sales and distribution, especially looking at the agent's population. We call this customer centricity, and it's really about being much more refined in understanding customers, so customers in segmentation, combined with lead management via the agents in a digital way. It's more than that.
It is, as I said to begin with, it's a process, it's a program that actually changes how we think about customers, how we interact with them. More about this later. Underpinning all of this is capability building. You can't implement a new, very radical transformational strategy and then think it'll just land neatly with the organization. You really need to build the capability so that they can lift. We created customer offices centrally, regionally, and locally to drive this transformation. Then we also did launch a customer academy to do the training, and we are training both skills, so within CX, data management, brand, et cetera, and then we're also changing mindsets. CX certification, for example, growth mindset, and human-centered design, for example. We're starting with different tools when developing new products.
The other aspect that's also very, very key to our enabling our new direction is data analytics, and I can't emphasize it enough. In 2018, we acquired a company called Zcam in Slovenia, and in 2019 it actually became part of the customer office. Thank you, Mario, for doing that. It actually enabled us to take many decisions and create many of our projects based on data, based on understanding the customers, how they're behaving, and what we know about them. That continues to be important for us. With Zcam, we created the customer intelligence platform. Fancy title, but it is actually where we have all our customer data. We started by getting eight markets on board this platform, and then just recently, we have concluded all markets on the platform.
We have a much more refined picture of our customers, where they are, and how we can service them better. This is what we have achieved so far. Does that actually have any impact with customers? Well, I'm pleased to say it has, and Mario has already shared some of these numbers, but you can see customer satisfaction has gone up with almost 8%. In EMEA, even further than that, it's at 10%. EMEA is also more mature markets, but the customers are really thinking what we're doing is the right thing, and they're rewarding us with good scores when they actually use our service. We have also grown the retention rate across the period of time with 2%. You could ask, why is that important? Why is that important KPI?
Well, if we can retain existing customers for longer, that, of course, extends the customer lifetime value. Existing customers have less claims, they have higher product density, and they're more loyal to us. So it actually makes a lot of economic sense to focus on that. We also grew the net new customers, as I said, and now I'm breaking through the stage with 4.6 million customers, which is also a great achievement over the period of time. Lastly, when you look at our gross written premiums, we used to grow with around 4%. We had a dip during COVID, and now we are up to 13%. We're very happy with the progress we're making. If we then look at the last KPI, which is brand consideration, that's a stickier measure, stickier customer KPI. What is it?
Brand consideration is the kind of brands you consider when you're going to buy something. You are aware of more brands, and then you consider less brands, and then you decide which ones to buy from. We want to be up in that starting set, the consideration set. We're measuring that. We have also improved that. It's nice to see that customers are recognizing that we are doing the right thing. One of the things I'm most proud about we have done to drive brand consideration was our brand campaign, "What Can Go Right?", in 2021. It was launched at COP26, and it was linked to sustainability, which is part of our purpose, part of what we really stand for as a company. It was a carbon capture statue. You can see it up here.
The customers were asked to go into the statue, make a pledge for the planet. We combined that with climate activists around the world to promote the campaign and engage locally with the campaign. We reached 150 million customers and consumers. They're not necessarily all customers of ours, with a message that really resonated with them. It means that as an insurance company, you can be relevant. You can engage your audience with something that matters to them. It was not only looking at a campaign from us. It was actually engaging with it and making a difference for the planet. As part of that campaign, brand consideration went up 20% with our customers and + 10 percentage points with our non-customers, I should say.
It's even relevant for people that were not customer of ours. I mentioned we refreshed the brand. Some of our customers thought it's maybe a little bit cold, a little bit formal. We thought, let's go in and make it more relevant to the customers of today who are more on social media, who engages with brands in a more casual way. Here you can see where we were in the video and where we have developed to. You can also see how we are now focusing on a more positive message to our customers. With that, please roll the video. I'm sure you could see that this is a more relatable brand. It's more akin to what you're seeing in other media today, and it's much more relevant for our customers.
It really resonates internally with our own employees, and you can see it through the presentation here, and it also resonates with customers. We are very pleased with that, where we are on that journey. As I said, we've also looked at the customer experience, and I remember when I joined, at every meeting, Mario would ask me about, "Okay, so what about customer experience? When are we getting to that?" but we had to do the brand thing first. We had to kind of really be sure about what we wanted to do with the brand. We moved on to the CX vision, which is build a meaningful relationship in every interaction. What do we mean by that? As an example, when I joined, I went and listened to customer calls. I still do, but this actually happened when I just joined.
I listened to a call, it was a customer who called in to stop their insurance for their motorbike. The advisor from our side said, "Okay, what's your policy number? Then what's the registration number of the motorbike, and when would you like to cancel it for?" Those are all functional questions. If you have an ambition to create a meaningful relationship, you start with where the customer is. Okay, the customer, maybe this is traumatic, maybe it's not a good thing for him to hand in his motorbike license right now. The conversation starts with, "Oh, that's a shame. I bet you enjoyed riding that motorbike. What brand is it?" You start in a whole different place. This is a simple example, but this is of course what we need to do in every conversation, start with where the customer is.
To make it more tangible for the organization, just having a vision is not enough, so we also defined principles for the CX. What should always be frictionless and responsive? If a customer reached out to us, we need to take out all the stress of that engagement and make it seamless, fast, frictionless, for them in that process. Responsive. If they reach out to us on social media, we need to get back to them within a certain point of time. That's the expectations today. More personal and collective. Over time, we will be able to understand our customers better and deliver more personalized experience to them. At the end, uniquely human.
We are actually a very human company, which I realized when I joined Zurich, and that human face and those very strong values that we have, we need to meet the customer with them every time at every interaction. We do everything in threes, so we also have standards, CX standards. That's to define what good looks like of the experience, so that we can implement it across the group and let all boats rise. The CX standard starts with the red line standards. The transformation we've had due to the digitalization has brought customers' expectations up to a different level of the CX. If I can receive a parcel from Amazon, at least in other countries than Switzerland, the day after I have actually ordered it, why is it I cannot change my address on my Zurich policy?
We need to meet these expectations. We meet them with the red line standards. This is what we actually need to do ASAP to live up to the expectations of our customers. We have our target standards, which is the aspiration for what good looks like, and it's a target. It's a solid target. We need to get there as fast as possible. Lastly, the signature standards. The signature standard is something people will talk about. They will mention it. At Zurich, they do A, B, and C.
As an example, actually an example that I'm very proud of from the U.K., what we offer there, if a customer has had a traumatic experience, as part of their claim, not the claims process with us, but what happened to them before the claim, we offer them counseling. It's not in their contract. It's not something we must deliver. It's something we do because we care. It's up to the agent to actually engage with the customer to get a sense of, would this be helpful? That's an example of signature standards, but we are developing other signature standards as we speak. On the right hand side of this slide, you can see how we're enabling the implementation of these standards. It's not enough to have them on paper.
We need to really demonstrate to our customers that we make a real difference with them. The top three projects there at the list, the single customer view, the Zurich portal, and easy payments are digitalizations of the customer journey we do together with our good colleagues in IT and Ericson, who Mario mentioned already. We work really, really closely together through the development of these standards with them to say, "What kind of good solutions can we bring to the market in order to help them in this transition?" These are the three we're focusing on. We're also looking into sustainable options. We know that's important for the customers, and some of the things we are offering, for example is repair instead of replace. It's still a customer option, it's not something we're saying they must do, but giving them the choice is a good thing.
The last bit here is empathy training, empathy and care training I would call it, that we are rolling out to the organization. Again, to make a stronger connection with our customers and support the rollout of the standards. We're already seeing the impact of this CX strategy, and our more declared vision on how we should work with customers. You can see here Hello Zurich. It's an example from the U.K. It's a digitization of the claims journey, and it means when a customer report a claim, we can shoot them a link, quickly, and they can get online immediately with a claims handler. They can even do a video call. They can clear all the facts, answer a few questions, and then we'll leave them alone until we have resolved the claim.
It's actually much faster, much more seamless, and much more responsive as according to our standards and our principles. That actually generates an NPS score of 88. It's an amazing score, so it's a real game changer. It started in the U.K., but we're rolling it out to more markets. Another example is in our contact center in Spain. This is really an improvement of an existing process, so they have upgraded the service in the contact center for our customers. They can immediately see the details of our customers on screen. Sounds very easy, but if you know about contact centers, the advisors often have to kind of work around seven different screens to find all the information they need. We've simplified that here.
We've linked it up to the CRM system, so the customer can be serviced via email if they prefer that, or via Messenger if they prefer that. We have much more data at hand to servicing the right way. The staff here has gone through empathy and care training as I mentioned before already. They can see a huge uplift, not only because of the simplification, but also because of the more human, caring contact they're getting. Then also an impressive score here. The score has actually improved with 11 points because of this way of doing business or servicing our customers. Here's another example, although this presentation is mainly about retail, I'm just going to share an example also from commercial insurance. This is a mid-market broker.
You have to be aware of this here when you get up here because I fall into these. This is for the mid-market, and it's the broker quoting journey. This is of course a moment of truth for the broker and also for the customer. How quickly are they getting this quote that they're looking for? The U.K. team actually made a bold decision. It used to take days. It used to be a waterfall. First we look at it from one department, then we pass it over to the other one, et cetera. Not very efficient. They set themselves a big, hairy goal to do that within two hours, and they managed to do so.
What I'm most proud of is that, yes, they got more business because of it, they also improved their NPS score so the experience is better for the customer. At the end of the day, what they did, they made it the standard. Now every or almost every, 95% of these quotes are happening within two hours. That's a real game changer, and it gives a real success feeling to the team as well because they land much more business that way. They also actually got recognized by the industry. They got a Customer Experience Excellence Award. Being recognized outside is, of course, also important. Now to how we are changing how the agents and our distribution and selling process is running.
This was a project that started in Switzerland, our local market here, and we work with our great colleagues in the BU. You will hear from them later in a little video. We started by doing segmentation of our customers in the marketplace. What are these customers? What groups are they in, and what needs do they have? Do they wanna be serviced fast? Do they want to do self-service or do they really want to talk to a person in the period of time? That then leads to automated lead generation, so the agents can serve relevant leads up to the customers and have a more targeted conversation with them based on understanding their needs.
It also led to new product innovation, so for one of the segments here, the high flyers, there is actually now a new product in the market which is an all-encompassing home insurance instead of, okay, here's a one for your watches, here's one for your furniture, here's one for your art. They recognized this need and simplified it into one project. As I said, it's not just about that. It's actually about culture change. I won't talk so much about this because I'm showing you a video in a second, and you can hear from one of our agents and our head of distribution and sales how it's impacted them. It has really meaningful impact on the economics as well. Policy density has grown by 1.3%. The customer appointment rate is going up because now these appointments are more targeted.
They're more focused on what the customer needs. Even the Agents' Advice NPS, which was already high, has gone up. Most important of all, it also drives BOP at the end of the day, and we're estimating that it will drive 2% BOP across the business by 2025. If we look narrower at the agents' channel, of course it's a higher impact. We're rolling this out to more markets. We are already working with Brazil, where we also now will look at the broker segment and the affinity segment. We're in Indonesia. We're in Malaysia. We're starting up in Spain.
As you can see on the slide here to the right, you can see that we will cover 80% of our retail business by 2025, and it's about 60% of our life business, creating the same change of culture and the same economic impact. As I said, let's just listen to Thomas and Stephan, our agent. Listen to them tell the story. Notice the glint in their eye and the excitement. With that, please roll.
To develop our transactional customers to relationship customers, we implemented a program consisting of five cornerstones. First, we developed and implemented a hybrid customer segmentation model. Second, we build in an AI-based customer selection and lead management process. Third, we build a transparent performance management process and manage along all the same KPIs. Fourth, training of our agents has completely restructured and starts with customer understanding, communication, and advice skills before technical product training. Fifth, and finally, we implemented all our processes into the Zurich digital agent workplace to standardize sales processes and make life easier for our customers and our agents.
I think for us as agents, the biggest shift which happened with customer centricity is that we see the customer as whole and not only their insurance needs, so we can provide better solution and better consulting to them. Customer segmentation is really important for us as agents because it helps us to provide our customer with the right solution at the right time during their whole life cycle with Zurich. Customer centricity runs through the whole organization. It starts with consulting. It might end with a claim. Most importantly, it should be an end-to-end process for our customers. Our new approach enables us to serve our customers better because we have all the necessary information at our fingertips. We serve the customer faster, better, and more professionally.
We are already seeing promising results. Product density across all channels grew by 1.03%. The policy density out of our strategic segments grew by 1.32%. Our agents have sold year to date 56% more life and savings products to existing customers compared to the year prior, 10% more household policies, and reduced churn rate in the same portfolio by -4%. We continue our journey in 2023 with ambitious goals, distribution upskilling, and a strong focus on execution. All this to serve our customers better and build meaningful relationships. This is why customer centricity is so important to Zurich.
Could you see the glint in his eye? They're both very passionate about what we do, and they were part of the journey already from the beginning. That picture you see where you have the dome in the background with S tephan Federer, that was our first meeting with the agents. They have now become advocates beyond their own market. They're both talking to our internal people. They're also talking to new markets whenever we roll this project out to new markets, which actually gives the new market some confidence that this is going to work. It's not headquarters coming to say we should do something. We actually go arm in arm, and we kind of share the results. We also share some of the pain points we had during that journey. It wasn't always easy, but we can laugh about it today, and they are now advocates.
They help with the push and the change. Let's then turn our focus to where we're wanting to go, where the focus of the next strategic cycle will be all about loyalizing customers to become their insurer of choice by understanding them better, using all this wonderful data to understand them better and serve up products and services to them that are relevant for them going forward. We've now put the whole journey on a slide here. You can see on the left side, you can see what we have already done, which we're continuing to implement. It is not good enough if we do these things and they stay on paper. They need to get out and work in the organization, and we need to keep on focusing on it.
Then on this side over here, you can see the new initiatives that are complementing this transformation that we're working on. We have done the best-in-class customer value proposition. We have defined what an awesome experience is with Zurich and how we are going to get there. We have created a very, very helpful, insightful data platform that we keep on building out. We have changed the way we look at sales and distribution and how we work in that organization with customers in new ways. All of this, we're still rolling it out. We're still implementing it. To complement it, on the other side of the slide, we will be looking into customer pricing. It's not a revolution, but it's more factoring in now the understanding we have of our customers.
Instead of just looking at line by line of business, we will look at, bring a more holistic perspective into that situation as well. We will look at customer communication. We've changed how we look visually, now we're also changing how we speak, how we address in all customer communication. Our policies, we need to make them simpler, take some of the legalese and the insurance jargon out of them, so they are easier to understand. That's the next frontier. We must master multi-channel engagement, and to that, we have a new portal that we are launching, but in general also upping our game on CRM and in social media to engage more with customers. Finally, we wanna be loyalty leaders.
We really want to be the best in the industry on understanding customer loyalty and how to grow it and improve it over time. We know it's a bold ambition, but it's a powerful one because no one is really mastering it in insurance today, at least not in retail. We're pretty good a t it in Sierra's area, I should say, how we're loyalizing our commercial customers. We've been leading in that journey for years. Underpinning all of this continues to be capability building. The customer academy continues to be important, and we're now developing programs also for our brokers and also for our agents. It's not just us, we're upskilling on customers, it's kind of everyone. The famous empathy and care training that we will build into that as well. That's the whole plan on one slide.
To dig a little bit deeper, we're building out our customer intelligence platform with other data sources from CRM, from our campaigns, from other sources that we have from the agents to make it richer and richer and richer over time. Data is so important to us, and we've gained so much value out of this data and how we now can use it to facilitate decision-making. Then Zurich One Account. It's a customer platform. It's not that we don't have customer platforms today. We have variations of customer platforms in various markets. What we have done here is actually the same thing as we did with the CX standards. We've created a standard for what it should be to a customer. What should it be doing?
Apart from self-service, it also needs to work on engagement, taking complexity out, so you can see all your policies. You'll know when you have to renew them. It'll be simpler to engage. You can link directly to your agent. We are rolling that out in Switzerland shortly, actually in the spring, and then we have two markets lined up to follow after that, and then we'll continue the rollout of this standard as we go forward. As I said in the beginning, we really wanna understand loyalty on a higher level. For that, we have created this Zurich loyalty pyramid that you can see up there on the screen. We will create a loyalty pyramid for all our markets, probably also for some lines of business. But what it is, it's our way to understand loyalty on a more granular level.
At the bottom of this pyramid, you have the potential users and the prospect customers, so the whole market. Then we have a layer where we have the service users. They haven't bought anything with us yet. One layer up, we have transactional customers. They've got one product with us. Then we have one layer up, we have multi-policy customers. They have more than one, as the name says. We used to think about, okay, as long as they buy more from us, they're loyal. Now we're taking that concept one step further, and we're saying one level up is actually when they connect to us. Being in an intermediated industry, it can be difficult sometimes to have that direct contact with customers.
We know from our data that the more we have direct contact with them, the more they are loyalized, the more they understand what we deliver, the quality of the experience. We need to get more customers to connect with us. One level up, the top level is our core customers. They are connected to us. They have more than one product or policy. They are high-value customers, and they have a higher product density than the rest. You'll never be 100% up there. That's not how it works, but it's the more you can get moving up the pyramid is actually going to be the strategy. Moving on to the pyramid, acquiring customers and then once you've acquired them, do what you can to move them up.
Let me just bring this to life for you with an actual example. Here we have the numbers for Germany. This is a snapshot in time. Here you can see at the transactional customer level, we have 64%, so that's the percentage in the bubbles. Then in the blue bars, you can see the policy density. The multi-policy customers in Germany is 12%. They have a higher density. Then you have the connected customers with a 19%, slightly lower product density. You might ask, why do you wanna move them up, if they have a lower density? As I said, it's a snapshot in time. The strategy will then be to actually make sure that through the connection, the interaction, and the engagement, that you drive this product density up for that group.
The top core, which is brilliant in Germany, where you can see the 4%, they have an extremely high product density. That's not the same in all markets, but it's characteristic for Germany. What will a German BU then use this for? Well, they will use it to understand the opportunities of loyalization. How many of these transactional customers can we loyalize? What can we learn from the core customers and how we're approaching them and let that trickle down in the actual pyramid? A new way of thinking, a new way of thinking about loyalty in the organization, and also to link closer to how we are running our business. The last part of my presentation is just to take you through the customer KPIs. We continue to measure customer KPIs. Customer satisfaction is two...
Very, very important to us, and we know how to drive customer satisfaction, and so we keep the TNPS score. We also wanna keep on understanding how good are we at being relevant to our customers compared to the competition. We will also keep brand consideration in there. For the last KPI, we will still look at net new customers internally. It's still a very relevant metric for us, but we will look much more at the value of these customers. We will start measuring revenue retention. How much of the revenue are we retaining with our existing customers and how much are we loyalizing them in value terms going forward? This is how we plan to measure our efforts going forward. Just to summarize, we are seeing impact of our efforts. We are loyalizing customers. We are attracting new customers.
We have a clear path for what we are going to focus on in the next strategic cycle. It's all about loyalization. Maybe a last comment on loyalization, you can't buy loyalization. You have to earn it as well. You earn your customer's loyalty by actually delivering them very, very strong personalized experiences and by demonstrating you understand them and you understand the situation they're in. With that, we will keep on tracking, as I said, and I'm so much looking forward to meeting you again in three years' time to tell you how far we've come. Thank you.
That's great. Thank you, Conny. We're now gonna have lunch. After lunch, we'll come back with Sierra on commercial insurance, and George will give the finance update. For those on the website, on the webcast, we'll start again at 12:45 P.M. CT. Thank you very much. We'll now have lunch.
Words. When it comes to making a difference, that's all anyone seems to offer. Our world needs action, not just words. People are eager to make a positive impact. Tech giants and FinTechs have disrupted insurance and raised customer expectations by offering hyper-convenience. People want more than convenience.
Hmm.
Our customers want personalized experiences, services, and products tailored to their needs, and they want it all driven by a purpose they believe in. Our customers want a partner that will amplify their efforts toward positive change, and Zurich has what it takes. As one of the world's most reliable and stable companies with a long history of success, we have the strength and scale to redefine insurance for the 21st century. It's time to think beyond competition and collaborate with other game-changing brands. Most importantly, it's time to collaborate with our customers. By facilitating new communities for peer-to-peer and expert advice, we can involve customers as active participants and help prevent things from going wrong in the first place. Prevention isn't about us and them. It's about everyone working together, empowering all of us to be part of the solution.
Providing peace of mind that what we are doing makes our lives more sustainable, healthy, and secure. Building confidence that you are doing the best you can to protect yourself, your family, your business, and the world. Together with our customers, we can become a force not only for good, but for optimism. We can drive positive progress and move beyond words because there is an activist in all of us just waiting to spring into action. Create a brighter future together. Zurich.
My name is Alain Lagesse. I'm the Group Risk Manager for Louis Vuitton Moët Hennessy. I can think of five or six reasons. The financial strength of Zurich, probably the number one. The global reach of Zurich and its network. The quality of the Zurich teams with whom we work. They have a full servicing capability, doing all aspects of servicing of our accounts. A broad risk appetite, so presence on several programs. Transparent communication with our account managers and senior leaders. A couple of years ago on a particularly difficult property renewal, we were able to get Zurich for a sizable participation after.
Two months debate with the underwriting team and some particularly transparent communication, and we were able to structure a pretty customized solution that helped us complete our placement and also help manage the risk, the cat risks for the Zurich underwriting team.
We all have a role to play in protecting our planet for future generations. Whether our contribution is large or small, it's a choice we make every day.
I pledge to reduce waste. To move to a more plant-based diet.
I pledge to use less plastic and start recycling more.
Curbing climate change is the greatest challenge of our time, and it will take all of us to stop it. At Zurich, we believe individual contributions can add up to something much bigger. That's why we want to inspire and empower our customers, employees, and our communities to take action with us, because together we achieve more.
A company like us has to act, has to do real things. The climate can be improved if we all start doing the things that we can and we want to do.
Tackling climate change needs allies. Zurich is mobilizing for climate action through the Zurich Forest Project, launched in Brazil in 2020. We have partnered with photographer Sebastião Salgado and his wife Lélia, founders of non-profit Instituto Terra, to help restore a portion of Brazil's Atlantic Forest to its natural state.
We must come back to our planet. If you want to survive as a species, we must come back to the planet. We must rebuild parts of the planet that we destroyed.
The Zurich Forest Project aims to reverse the damage inflicted by decades of cattle farming and logging. It helps to make environmental topics like nature restoration and biodiversity more tangible. "A forest," Salgado says, "is not a single being. It's built over many years, tree by tree. A tree is a shelter for other creatures. It holds the soil together and catches rainwater. It's perfectly attuned to the seasons.
The environment, the biodiversity is local. We are planting a forest in Brazil. We are using local species because the biodiversity, the ants, the termites, these insects, the snakes, the birds, they love only the essence of the region. We must replant the forest. We must rebuild part what we destroyed.
We decided to give a tree to every employee to make everybody aware that they have a role, that they have something that they have to do themselves, that their commitment is important. That tree is a call for action, to each one as an individual to continue doing what the planet is asking for.
At Zurich, we want our work to inspire people to take a stand for nature. Our new global headquarters in Switzerland is one of the most sustainable buildings in the world, and we aim to implement a sustainable buildings program in an additional 50 offices. We've set ambitious carbon emissions targets for our investment portfolio while also curbing emissions related to underwriting. Our global operations have been carbon neutral since 2014, and we aim to achieve net zero emissions by the end of this decade. We're cutting air travel-related emissions by 70%. We've cut paper consumption, eliminated single-use plastic, and we're turning our car fleet into 100% electric vehicles, and we're committed to using only renewable power worldwide by the end of 2022.
This is the beginning of a long wave of actions to make the planet sustainable. The others also will take their actions and initiatives, and if all of us on the planet do our contribution, we can save it.
My name is Daniele Zucchi, and I work for the reinsurance captive of Saipem. Zurich is extremely relevant for our business. Since more than 25, probably 30 years, Zurich supports the activity of Saipem's worldwide. Saipem is present with physical presence in more than 40 countries worldwide, and Zurich always managed to assist the group in placement of local insurances and of course the cession into the captive.
Buckle up and swoop in from the shores of Lake Quai Zurich Campus. Welcome to one of the most sustainable corporate headquarters in the world. From every angle, it reflects how we've evolved and who we now are. While the original building dates back to 1900, today the entire campus is more than just a place to work. It's a home for our community and a key part of Zürich City's cultural fabric. The historic entrance is a testament to our rich past and remains at the heart of the preserved building. Our first boardroom has been restored to its original state, including its wooden floors, wall paneling, carpets, stucco ceiling, furniture, curtains, and even the wallpaper. The Zürich Campus has come a long way from its origins and is now an elegant statement on the importance of physical spaces in an increasingly digital era.
The modern prism glass facade is an eco-friendly architectural landmark and a key contributor to reducing energy consumption. Its smart window panes help control temperatures inside. It's the ideal setting for employees, customers, and visitors to meet, collaborate, and discuss fresh ideas. Modular furniture adapts to create the right space for everyone. The campus also features spacious meeting rooms where we gather and where ideas grow. Zurich is making the most of innovation with 2,000 smart sensors monitoring air quality, people flows, workstations, and much more. Quai Zurich Campus. A third of our open spaces have greenery, a climate-friendly solution that includes cacti and other plants that capture CO2. Solar panels generate electricity, and we collect rainwater for our sanitary systems. Lake water circulates through pipes hidden in the ceiling for heating or cooling.
To drive home our carbon neutral commitment, the campus garage offers parking for electric cars only, while our fleet is already 100% electric. To maintain a good work-life balance, employees enjoy spacious and state-of-the-art wellness facilities on site, open 24/7. Sustainability is also about eating clean, and Alfred's Kitchen offers various healthy, tasty, and locally sourced dishes. We can help fight food waste by buying leftover meals and taking them home for dinner. Nearby is the K Café, which is also open to the public. It's the place to go for that perfect morning cappuccino, a tasty business lunch, or a relaxing Quai Zurich Campus, a place with strong values rooted in a successful past and open to creating a brighter future together.
My name is Lars Henneberg. I'm the Risk Manager at Maersk. Zurich is instrumental in the execution of our strategy. They provide fronting services for our captive, which allows us to distribute the capacity of our captive into local territories. They also help us understand and manage our property risks through loss prevention surveys and climate resilience surveys. They also support our insurance products that we offer to our customers. Zurich is a long-standing and trusted strategic partner. Zurich is always available and responsive and keen to understand our needs.
I was an inventor, not just an engineer. We were gonna have a revolution. We were gonna change how society works to solve problems, to educate.
There must be a way to make disasters less disastrous and getting to a place where we can improve resilience.
Well, we've created a technology to protect your kids from cyberbullying.
Everyone at Zurich is so involved in making this initiative a success.
We are building a better society using collaboration.
With collaboration, innovation can happen.
Innovation is about taking risks. Embrace risk.
Embrace the change and bring the boldness.
If you want to be a sustainable company, it's the people, it's the environment and the change and the impact you have on it.
The leadership builds the ecosystem. They enable teams to experiment all the time and bring evidence to the table.
You really need to make a culture where bottom-up, the ideas are flowing. Make sure that we understand and focus on the customer problems that we're trying to solve. The technologies are here. The innovation will be how do we implement them and in what kind of speed?
If you don't ask what could be, you're never going to innovate as much as you could.
If we just do the same things, we're not moving forward.
It has been an amazing journey. I'm very proud to say that we have been able to change the lives of a lot of people.
Thank you so much for being here. Hopefully, you're gonna leave feeling inspired, optimistic, and excited about the future. For more Zurich Talks: Future Innovation, please follow the link below.
My name is Marcus Reichel. I'm the head of insurance at Knauf. Zurich is strategically relevant for us in our business because we are operating in more than 100 countries, and we use the Zurich infrastructure and the Zurich network to have fully compliant insurance policies all around the world. Second, we are a data-driven company, and with the API we are using between our networks and our systems and Zurich, we have a competitive advantage by providing data to insurers, to our local operations, and this is also extremely important for us in our business we are doing with insurance.
Words. When it comes to making a difference, that's all anyone seems to offer. Our world needs action, not just words. People are eager to make a positive impact. Tech giants and FinTechs have disrupted insurance and raised customer expectations by offering hyper-convenience. People want more than convenience. Our customers want personalized experiences, services, and products tailored to their needs. They want it all driven by a purpose they believe in. Our customers want a partner that will amplify their efforts toward positive change. Zurich has what it takes. As one of the world's most reliable and stable companies with a long history of success, we have the strength and scale to redefine insurance for the 21st century. It's time to think beyond competition and collaborate with other game-changing brands. Most importantly, it's time to collaborate with our customers.
By facilitating new communities for peer-to-peer and expert advice, we can involve customers as active participants and help prevent things from going wrong in the first place. Prevention isn't about us and them. It's about everyone working together, empowering all of us to be part of the solution. Providing peace of mind that what we are doing makes our lives more sustainable, healthy, and secure. Building confidence that you are doing the best you can to protect yourself, your family, your business, and the world. Together with our customers, we can become a force, not only for good, but for optimism. We can drive positive progress and move beyond words. Because there is an activist in all of us just waiting to spring into action.
Create a brighter future together. Zurich.
My name is Alain Lagesse. I'm the Group Risk Manager for Louis Vuitton Moët Hennessy. I can think of five or six reasons. The financial strength of Zurich, probably the number one. The global reach of Zurich and its network. The quality of the Zurich teams with whom we work. They have a full servicing capability, doing all aspects of servicing of our accounts. A broad risk appetite, so presence on several programs, and transparent communication with our account managers and senior leaders.
A couple of years ago, on a particularly difficult property renewal, we were able to get Zurich for a sizable participation after two months' debate with the underwriting team and some particularly transparent communication, and we were able to structure a pretty customized solution that helped us complete our placement and also help manage the risk, the cat risks for the Zurich underwriting team.
We all have a role to play in protecting our planet for future generations. Whether our contribution is large or small, it's a choice we make every day.
I pledge to reduce waste. To move to a more plant-based diet.
I pledge to use less plastic and start recycling more.
Curbing climate change is the greatest challenge of our time, and it will take all of us to stop it. At Zurich, we believe individual contributions can add up to something much bigger. That's why we want to inspire and empower our customers, employees, and our communities to take action with us, because together we achieve more.
A company like us has to act, has to do real things. The climate can be improved if we all start doing the things that we can and we want to do.
Tackling climate change needs allies. Zurich is mobilizing for climate action through the Zurich Forest Project, launched in Brazil in 2020. We have partnered with photographer Sebastião Salgado and his wife Lélia, founders of nonprofit Instituto Terra, to help restore a portion of Brazil's Atlantic Forest to its natural state.
We must come back to our planet. If you want to survive as a species, we must come back to the planet. We must rebuild parts of the planet that we destroyed.
The Zurich Forest Project aims to reverse the damage inflicted by decades of cattle farming and logging. It helps to make environmental topics like nature restoration and biodiversity more tangible. "A forest," Salgado says, "is not a single being. It's built over many years, tree by tree. A tree is a shelter for other creatures. It holds the soil together and catches rainwater. It's perfectly attuned to the seasons.
The environment, the biodiversity is local. We are planting a forest in Brazil. We are using local species because the biodiversity, the ants, the termites, these insects, the snakes, the birds, they love only the essences of the region. We must replant the forest. We must rebuild part of what we destroy.
We decided to give a tree to every employee to make everybody aware that they have a role, that they have something that they have to do themselves, that their commitment is important. That tree is a call for action, to each one as an individual to continue doing what the planet is asking for.
At Zurich, we want our work to inspire people to take a stand for nature. Our new global headquarters in Switzerland is one of the most sustainable buildings in the world, and we aim to implement a sustainable buildings program in an additional 50 offices. We've set ambitious carbon emissions targets for our investment portfolio while also curbing emissions related to underwriting. Our global operations have been carbon neutral since 2014, and we aim to achieve net zero emissions by the end of this decade. We're cutting air travel-related emissions by 70%. We've cut paper consumption, eliminated single-use plastic, and we're turning our car fleet into 100% electric vehicles, and we are committed to using only renewable power worldwide by the end of 2022.
This is the beginning of a long wave of actions to make the planet sustainable. The others also will take their actions and initiatives, and if all of us on the planet do our contribution, we can save it.
My name is Daniele Zucchi, and I work for the reinsurance captive of Saipem. Zurich is extremely relevant for our business, as since more than 25, probably 30 years, Zurich supports the activity of Saipem's worldwide. Saipem is present in with physical presence in more than 40 countries worldwide. Zurich always managed to assist the group in the placement of local insurances and of course, the cession into the captive.
Buckle up and swoop in from the shores Quai Zurich Campus. Welcome to one of the most sustainable corporate headquarters in the world. From every angle, it reflects how we've evolved and who we now are. While the original building dates back to 1900, today the entire campus is more than just a place to work. It's a home for our community and a key part of Zurich City's cultural fabric. The historic entrance is a testament to our rich past and remains at the heart of the preserved building. Our first boardroom has been restored to its original state, including its wooden floors, wall paneling, carpet, stucco ceiling, furniture, curtains, and even the wallpaper. The Zurich campus has come a long way from its origins and is now an elegant statement on the importance of physical spaces in an increasingly digital era.
The modern prism glass facade is an eco-friendly architectural landmark and a key contributor to reducing energy consumption. Its smart window panes help control temperatures inside. It's the ideal setting for employees, customers, and visitors to meet, collaborate, and discuss fresh ideas. Modular furniture adapts to create the right space for everyone. The campus also features spacious meeting rooms where we gather and where ideas grow. Zurich is making the most of innovation with 2,000 smart sensors monitoring air quality, people flows, workstations, and much more. Sustainability Quai Zurich Campus. A third of our open spaces have greenery, a climate-friendly solution that includes cacti and other plants that capture CO₂. Solar panels generate electricity, and we collect rainwater for our sanitary systems. Lake water circulates through pipes hidden in the ceiling for heating or cooling.
To drive home our carbon neutral commitments, the campus garage offers parking for electric cars only, while our fleet is already 100% electric. To maintain a good work-life balance, employees enjoy spacious and state-of-the-art wellness facilities on site, open 24/7. Sustainability is also about eating clean, and Alfred's Kitchen offers various healthy, tasty, and locally sourced dishes. We can help fight food waste by buying leftover meals and taking them home for dinner. Nearby is the K Cafe, which is also open to the public. It's the place to go for that perfect morning cappuccino, a tasty business lunch, or a Quai Zurich Campus, a place with strong values rooted in a successful past and open to creating a brighter future together.
My name is Lars Henneberg. I'm the Risk Manager at Maersk. Zurich is instrumental in the execution of our strategy. They provide fronting services for our captive, which allows us to distribute the capacity of our captive into local territories. They also help us understand and manage our property risks through loss prevention surveys and climate resilience surveys. They also support our insurance products that we offer to our customers. Zurich is a long-standing and trusted strategic partner. Zurich is always available and responsive and keen to understand our needs.
Innovation. It's on the tip of everyone's tongue. Today, innovation is advancing at greater speed than ever, and it seems to be at the heart of virtually everything we do.
Alexa.
I'm having trouble understanding.
Innovation is also very challenging for all of us because innovation means that things are gonna change. Innovation is a great opportunity that we took to give customers new services, new means of contact, and new opportunities to work with Zurich Insurance.
Welcome. Exciting to be here with you all. Now, this edition of Zurich Talks is gonna focus on the future of innovation. We've got some rather amazing speakers.
He's a legend of our digital times. The co-founder of Apple, Mr. Steve Wozniak.
I was an inventor, not just an engineer. We were gonna have a revolution. We were gonna change how society works to solve problems, to educate.
There must be a way to make disasters less disastrous and getting to a place where we can improve resilience.
Well, we've created a technology to protect your kids from cyberbullying.
Everyone at Zurich is so involved in making this initiative a success.
We are building a better society using collaboration.
With collaboration, innovation can happen.
Innovation is about taking risks. Embrace risk.
Embrace the change, and bring the boldness.
If you want to be a sustainable company, it's the people, it's the environment, and the change and the impact you have on it.
The leadership builds the ecosystem. They enable teams to experiment all the time and bring evidence to the table.
You really need to make a culture where bottom up the ideas are flowing. Make sure that we understand and focus on the customer problems that we're trying to solve. The technologies are here. The innovation will be how do we implement them and in what kind of speed.
If you don't ask what could be, you're never going to innovate as much as you could.
If we just do the same things, we don't move forward.
It has been an amazing journey. I'm very proud to say that we have been able to change the lives of a lot of people.
Thank you so much for being here. Hopefully, you're gonna leave feeling inspired, optimistic, and excited about the future. For more Zurich Talks Future Innovation, please follow the link below.
My name is Marcus Reichel. I'm the head of insurance at Knauf. Zurich is strategically relevant for us in our business because we are operating in more than 100 countries, and we use the Zurich infrastructure and the Zurich network to have fully compliant insurance policies all around the world. Second, we are a data-driven company, and with the API we are using between our networks and our systems and Zurich, we have a competitive advantage by providing data to insurers, to our local operations, and this is also extremely important for us in our business we are doing with insurance.
Words. When it comes to making a difference, that's all anyone seems to offer. Our world needs action, not just words. People are eager to make a positive impact. Tech giants and FinTechs have disrupted insurance and raised customer expectations by offering hyper-convenience. People want more than convenience.
Hmm.
Our customers want personalized experiences, services, and products tailored to their needs, and they want it all driven by a purpose they believe in. Our customers want a partner that will amplify their efforts toward positive change, and Zurich has what it takes. As one of the world's most reliable and stable companies with a long history of success, we have the strength and scale to redefine insurance for the 21st century. It's time to think beyond competition and collaborate with other game-changing brands. Most importantly, it's time to collaborate with our customers. By facilitating new communities for peer-to-peer and expert advice, we can involve customers as active participants and help prevent things from going wrong in the first place.
Prevention isn't about us and them, it's about everyone working together. Empowering all of us to be part of the solution. Providing peace of mind that what we are doing makes our lives more sustainable, healthy and secure. Building confidence that you are doing the best you can to protect yourself, your family, your business, and the world. Together with our customers, we can become a force, not only for good, but for optimism. We can drive positive progress and move beyond worry, because there is an activist in all of us just waiting to spring into action. Create a brighter future together. Zurich.
My name is Alain Lagesse. I'm the Group Risk Manager for Louis Vuitton Moët Hennessy Moët Hennessy Louis Vuitton. I can think of five or six reasons. The financial strength of Zurich, probably the number one. The global reach of Zurich and its network. The quality of the Zurich teams with whom we work. They have a full servicing capability, doing all aspects of servicing of our accounts. A broad risk appetite, so presence on several programs. Transparent communication with our account managers and senior leaders. A couple of years ago, on a particularly difficult property renewal, we were able to get Zurich for a sizable participation after two months' debate with the underwriting team and some particularly transparent communication.
We were able to structure a pretty customized solution that helped us complete our placement and also help manage the risk, the cat risks for the Zurich underwriting team.
We all have a role to play in protecting our planet for future generations. Whether our contribution is large or small, it's a choice we make every day.
I pledge to reduce waste. To move to a more plant-based diet. I pledge to use less plastic and start recycling more.
Curbing climate change is the greatest challenge of our time, and it will take all of us to stop it. At Zurich, we believe individual contributions can add up to something much bigger. That's why we want to inspire and empower our customers, employees, and our communities to take action with us. Because together, we achieve more.
A company like us has to act, has to do real things. The climate can be improved if we all start doing the things that we can and we want to do.
Tackling climate change needs allies. Zurich is mobilizing for climate action through the Zurich Forest Project, launched in Brazil in 2020. We have partnered with photographer Sebastião Salgado and his wife Lélia, founders of nonprofit Instituto Terra, to help restore a portion of Brazil's Atlantic Forest to its natural state.
We must come back to our planet. If you want to survive as a species, we must come back to the planet. We must rebuild parts of the planet that we destroyed.
The Zurich Forest Project aims to reverse the damage inflicted by decades of cattle farming and logging. It helps to make environmental topics like nature restoration and biodiversity more tangible. "A forest," Salgado says, "is not a single being. It's built over many years, tree by tree. A tree is a shelter for other creatures. It holds the soil together and catches rainwater. It's perfectly attuned to the seasons.
The environment, the biodiversity is local. We are planting a forest in Brazil. We are using local species because the biodiversity, the ants, the termites, these insects, the snakes, the birds, they love only the essences of the region. We must replant the forest. We must rebuild part what we destroyed.
We decided to give a tree to every employee to make everybody aware that they have a role, that they have something that they have to do themselves, that their commitment is important. That tree is a call for action to each one as an individual to continue doing what the planet is asking for.
At Zurich, we want our work to inspire people to take a stand for nature. Our new global headquarters in Switzerland is one of the most sustainable buildings in the world, and we aim to implement a sustainable buildings program in an additional 50 offices. We've set ambitious carbon emissions targets for our investment portfolio while also curbing emissions related to underwriting. Our global operations have been carbon neutral since 2014. We aim to achieve net zero emissions by the end of this decade. We're cutting air travel-related emissions by 70%. We've cut paper consumption, eliminated single-use plastic, and we're turning our car fleet into 100% electric vehicles, and we're committed to using only renewable power worldwide by the end of 2022.
This is the beginning of the long wave of actions to make the planet sustainable. The others also will take their actions and initiatives, and if all of us on the planet do our contribution, we can save it.
My name is Daniele Zucchi, and I work for the reinsurance captive of Saipem. Zurich is extremely relevant for our business as-
Welcome back, everybody, after lunch. Welcome to the afternoon session of Investor Day. This afternoon, we've got Sierra Signorelli, CEO of Commercial Insurance, got George Quinn, Group CFO, and then we're gonna answer your questions. With that, Sierra.
Thank you and good afternoon. Welcome back from lunch. It was a pleasure to have a chance to talk to some of you over the break. I really look forward to the discussion about commercial insurance today. We're fortunate in that we start from a position of strength, and as we'll discuss today, our strategy will continue to focus on expanding our leading franchise. We're a global commercial insurer in a market-leading position. We've been intensely focused on rebalancing our portfolio to deliver record results. Over the past years, we've built a strong foundation, we've achieved great results, and we've built a high-quality portfolio that is more resilient for the future. As we look to the future, we will leverage our capabilities to continue our success. Let's start by taking a look at where we are today.
Commercial insurance makes up a significant portion of our P&C premium, as you can see on the left-hand side of the slide. It's critical that we do this well. It's a strength to our performance. Scale matters for our portfolio performance, for our relationships with brokers and with customers, and it allows us to invest and offer the capabilities that differentiate us in the market. We highlight just a few of those here. International Program Business, or IPZ as we like to call it, is very much part of our DNA. This was reinforced to me recently when we were preparing for our 150-year anniversary celebrations. I ran across the fun fact that we've been doing this since 1976. Not many companies do this, let alone do it well, and we're very proud of our capabilities and our team.
We continue to invest in IPZ to create greater digital connectivity to simplify a very complex environment for us, for our brokers, and for our customers. We have customers with hundreds, sometimes thousands of locations across many, many countries, and to place these programs, we sent 240,000 emails externally last year. By digitizing this process, we will ultimately deliver a better, a more sane and seamless service for our customers, our brokers, and for ourselves. Speaking of a better service, Zurich Resilience Solutions has one of the largest teams of global risk engineering experts. When you couple this with our vast claims insights, it provides us with a deep understanding across industries, and we wanna see our customers benefit from this. I firmly believe that prevention is critical to keep companies operational and to reduce the cost of risk for our customers.
For 30 years, we've been serving our customers as a leader in the captive space. It's an important capability that goes hand in hand with IPZ. Captive customers tend to have more sophisticated risk management teams, and we engage with them across a range of products and services, which allows us to bring the best of what Zurich has to offer. Relationships are critical in commercial insurance, and we have strong relationship management skills, both as it relates to our relationship customer model and with brokers. We have significant relationships with the largest brokers, and we will continue to grow with them. We are also growing at an even faster pace with the large and national brokers. We're gonna touch more on this later. For now, let's take a look at our strategy.
Our strategy has positioned us well to succeed in an evolving and complex landscape, and it will continue to serve us well in the coming years. We discussed the strategy last year. Our strategy remains unchanged. It is anchored on four pillars, portfolio, people, insights, and customers, and I'll take you through all of these shortly. Let's first look at the environment in which we operate. In 2022 has been a year of considerable change with evolving macroeconomic and geopolitical environment. We've seen inflationary pressures come in, supply chain issues continue to persist. We have a looming energy crisis, and global weather events are creeping into the month of November. All of these pose significant challenges. Today, we'll talk about how we navigate this environment. Rates have improved dramatically over the last five years, and they continue to remain positive.
Following years of market hardening, rates have flattened slightly in 2022, but many of the factors that are driving rate persist, indicating that positive rate will continue. While rate is always important, it's good to see continued discipline in market terms and conditions as well, which is important in maintaining profitability now and in the future. We feel positive about where we are today, and the current opportunities in the market outweigh the challenges, and we'll continue to pursue these opportunities. We will focus on our fantastic people, our balanced and resilient portfolio, delivering for our customer, and navigating the market through deeper insights. As I mentioned, the ongoing execution of our priority has continued to deliver the results that we want, as you will see on the next slide. We have delivered outstanding results through underwriting actions over the past years.
As we discussed last year, these actions have resulted in dramatic improvement. We've seen growth, we started to fix early, we repositioned ourselves, and we grew as pricing improved. We achieved 13 points of combined ratio improvement from 2017 to 2021, and we continued the improvement through the first half of this year. We dramatically increased our contribution to group BOP, despite headwinds with investment results. The strong performance is a direct result of our work to rebalance our portfolio and to drive better risk selection across our business, as you'll see on the next slide. We dramatically rebalanced the portfolio by product mix, as you'll see on the left-hand side of the slide. This is a meaningful shift, and it improved the profitability and the resilience of our portfolio.
We've improved the performance in absolute terms and relative to peers, as you'll see in the center of the slide. We've also reduced volatility by reducing our exposure to systemic risks and reducing our capacity to individual exposures. We have brought back an underwriting culture focused on the quality of risk and terms and conditions. In a shifting pricing environment, this will serve us well. We continue to adapt our underwriting appetite. We will expand our appetite as we see opportunities. We will limit our exposure where needed, and we've proven our ability to do this in recent years. Ultimately, we've constructed a portfolio that's higher quality with lower volatility, focusing on our technical strengths and our capabilities. Let me bring this to life through a few examples. We're focused on sustainable growth. We made this trickier than it needs to be.
We've decisively stayed away from a number of areas that have been impacted by recent events, with little to no exposure to challenging lines such as aviation and event cancellation. There are also nuances in risk appetite that go well beyond whether we write an entire line of business or not. It requires both technical expertise and discipline. I'm gonna share a couple of examples. We've remained disciplined when it comes to marine. We write risks where we have the technical expertise, which is mainly cargo. Fires still occur on cargo ships, so we wanna stay disciplined with the amount of capacity we deploy and understand how much stock is a company willing to allow on a single vessel, especially for high-value, items such as automobile fleets. We've avoided large exposures to these industry losses in recent years, and we maintain a profitable portfolio.
With cargo, there's also always some element of storage. In a hard property market, some of these exposures find their way into the marine market, but we're disciplined when it comes to stock storage. Our underwriting teams work closely with risk engineering to understand these storage risks, to manage peak exposures, and to work through contingency plans for the most challenging risks. A good recent example of where we applied this expertise and adapted to new challenges was with high-value vaccines. In this case, as with many marine storage risks, they're stored near water, meaning they're exposed to cat events. We ensured that there were strong plans in place to evacuate the stock in the event of a severe storm event.
Overexposure to any one risk can quickly undo all of the good work we do with every other decision that we take. We take a selective approach with a view of accumulation, and then we work with those companies that have robust risk management and are willing to engage with our risk engineering teams to ensure that we have strong controls. Another example, energy and technical risks portfolios. Think steel mills or offshore oil platforms. We've completely overhauled our approach, starting in 2017. We've managed this both from a portfolio perspective and a technical perspective, which is critical. We need enough scale to sustain losses, enough capacity to be relevant, and enough spread of risks so that no single loss can wipe out the profitability of our portfolio.
We also need the right technical expertise to ensure that each and every risk that we place in that portfolio is of the right quality. Over time, we've both grown our portfolio, and we've improved our performance to the extent that it's one of our best-performing portfolios, even in a year where there's been a number of industry losses. Even when we're confident in the risk quality and the terms and conditions, we maintain disciplined net lines because even the best technical risks can have catastrophic losses. Participating in smaller shares across a number of technically selected risks allows us to manage our portfolio and diversify risk. Proactive management of exposures is also critical. Here we have two examples, credit exposure and flood.
We proactively pruned our credit exposure, which helped us to address the knock-on effects of certain industries such as travel and retail through COVID, and we continue to reduce our exposure, which positions us well for the current economic outlook. We then use our capacity to grow surety where we see a growing opportunity in construction. Flood exposure is absolutely critical. You just look at the impact of any recent weather event. We continuously improve our models, and then we actively manage any exposures that change as a result. A recent flood update provided us with a more granular and expansive view of flood. After implementing this model, we noted that a portion of our insured locations and large property had exposures that needed to be reevaluated to bring them back in line with our risk appetite, and then we managed this effectively.
We also look to grow sustainably. We've both grown and rebalanced our financial lines portfolio. We reduced capacity, we obtained rate, we shifted industry mix, and then we grew our portfolio while remaining disciplined, which means we avoided exposures to SPAC and crypto. While we may not have grown as much as some, we've grown at a steady pace that we believe is sustainable. We also maintained a steady march as we continued to grow our A&H portfolio, and we can expect to see continued opportunity there. We're doing all of this while we continue to manage capacity, as we'll see on the next slide. It's critical that our risk appetite informs how we deploy capacity and how we use deductibles. It's also important that we track the progress that we make.
Two examples on the slide illustrate our continued progress that we're making in our risk-based underwriting approach. In the middle of the slide, we have a property example. We deploy less capacity for higher hazard risks and more capacity for lower hazard risks. As you can see, we've reduced capacity across all risks with a greater reduction in the higher hazard segment. Similar to the technical risks example that I gave, even the best managed high hazard risks can have catastrophic losses, so we tend to focus there. Since we started our capacity deployment strategy in 2018, we have reduced our average capacity net of captives and FAC by 75% for the highest hazard risks. Deductibles. For deductibles, we use a liability example. Here we have intentionally excluded Zurich North America as deductibles are often set by an actuarial analysis, which is a different approach.
To keep it simple, we focus outside the U.S. on traditional deductible programs. We see that in liability, we've increased average deductibles across the whole portfolio, but we've been particularly focused on the lower appetite risks with an average deductible increase of 40% between 2020 and 2021. This incentivizes stronger risk management and also helps with inflation. As we think about our portfolio, we also keep a close eye on inflation. We continue to see rate in line or in excess of claims trend, and we take targeted actions beyond rate to actively address inflationary drivers. In countries, we conduct cross-functional reviews where we bring together internal experts, and we use internal, external, and group data to understand the trends and determine actions.
In commercial, we have many customers with cross-border exposures, so we share those trends across countries so that we price for those risks appropriately. Here on the slide, you see some of the drivers and some of the actions. To take one example, for property, it's important that we have the correct property values. We price property based on values, so if we don't have the correct values, we're not pricing for the risks that we're taking. This is something that the industry lost focus on over the last decade, so we're working hard to bring back this discipline. We work with brokers and customers across our property portfolio to update values.
As we do this, it's critical that we can track the progress on our portfolios and also to alert our underwriting teams where they need to address values. To make this easier, we implemented a valuation tracking capability earlier this year. This allows us to see what portion of our portfolio has been revalued, and it alerts the underwriter to areas that need attention. You'll see the alert created in the tool that we have in our insights video later. I mentioned the deductibles are critical to help with inflation, but equally, if not more important, is the need to address social inflation, which we're gonna talk about next. I thought it might be helpful to back up a bit and define social inflation so that we're clear what we're talking about before I tell you how we're tackling it.
Social inflation is the trend towards increased liability losses above and beyond the general economic inflation. We see loss cost trends and liability increasing well in excess of the consumer price index, particularly in excess liability portfolio. However, we've been adjusting our loss cost assumptions and reserving, and George will speak to this later. We've been achieving significant rate on this portfolio, which helps as well. There was a temporary relief in this development while some of the courts were closed during COVID-19, but the pattern looks to be returning back to pre-pandemic levels. What's driving this trend? The main drivers are changing juror demographics, evolving legal tactics, litigation funding, and the legal landscape. In the U.S., a plaintiff has the right to choose a jury of their peers over a judge in deciding their case. We see that younger generations have a different perspective than previous generations.
As we look at this population of jurors, keeping people safe is one of their top priorities, viewing themselves as the protectors of the community advocates needing to send a message. The traditional role of jurors was to follow the evidence, apply the facts and the law. Quite different. A different sense of personal responsibility as well. If somebody is injured, the expectation is somebody needs to pay. This is coupled with this growing perception of corporate greed and mistrust. Significant awards often focus on where a plaintiff can allege that a company has not kept people safe and where there's a perception of profit over people. Plaintiff law firms prime jurors to increasing large settlement numbers. I'm sure anyone that's been to the U.S. recently has seen advertising of large awards on public transport or even on billboards in some communities.
We're also seeing evolving legal tactics based on the fear for safety and security that subtly put the juror in the shoes of the plaintiffs. They call this the Reptile Theory, which refers to the reptilian part of our brain that's sensitive to danger. We all have that back here. Plaintiff firms have realized that by engaging in the most primal part of our mind, that they can provoke fear, that if a defendant's actions are allowed to continue, then the community or maybe even the jury itself could be in danger.
When you combine the desire to keep people safe, the sensitivity of profit over people, and the fear that if you, as a juror, don't do something and send a strong message that this situation could happen to you or one of your loved ones, along with years of unraveling tort reform, we have a bit of a perfect storm. The rise of litigation funders does not help. This makes it more difficult for us to settle cases, and currently, they're not regulated or transparent in all states. We see non-recourse loans carrying 30%-over 100% interest, which leads to a growing industry currently estimated at $12 billion and expected to grow to nearly $26 billion over the next several years. What do we do about this? We've been managing social inflation for a number of years.
We've reinforced core capabilities across underwriting and claims to proactively address social inflation. When it comes to underwriting, having a clear appetite, being able to price for the risk, having disciplined capacity employment, and then portfolio tracking mechanisms to ensure that we're achieving what we set out to do are absolutely critical. We also have centers of expertise for those industries that are trickier, where we bring together experts across underwriting, claims, and risk engineering to ensure we understand these challenging industries and how best to approach them, both when it comes to how we underwrite them and how we help our customers reduce risk. We can help our customers reduce risk. Our capabilities in claims are absolutely critical. We've reinforced our complex liability team, which is made up of the most experienced claims professionals we have.
Each of them has over 25 years of experience, and these professionals understand the tactics being used and how to mitigate them. Not only is it important that we have the right technical capabilities, but it's also important that we have adequate staffing to ensure prompt and fair settlement. We want to drive proactive resolution, as in most cases don't need to go to court. They just need to be actively engaged. The team is also driving proactive industry action. Creating awareness and sharing knowledge is important. We're sharing insights with other leaders on the drivers of social inflation and the actions needed to combat those drivers. We also discuss reform efforts on topics such as governance for litigation funders, in addition to a number of other topics. Social inflation isn't a problem that's gonna go away anytime soon.
However, it is important that we have an exceptionally capable team actively engaging to mitigate adverse outcomes, and we've been doing this for some time. Another critical area to navigate for us and for our customers is natural catastrophe exposures and weather-related events. We're reducing our exposure to manage the overall impact of natural catastrophe events. Last November, we committed to reduce our exposure in U.S. windstorm and California earthquake by 10% across our portfolio over two years, and we're well on track to deliver, which is what we've illustrated on this slide. While I'm providing an update of U.S. wind and California quake here, for avoidance of doubt, we actively manage all of our natural catastrophe exposures. George will speak to our efforts across regions, and flood was mentioned as another example earlier.
Active engagement is critical as this is not a static risk and will need to continuously adapt. At the same time, we're supporting our customers to manage their exposure to natural catastrophe events, helping them to build resilience and to get back to business faster. As capacity becomes scarcer, the best managed risks are the most likely to obtain the insurance cover they need at reasonable rates. That's where Zurich Resilience Solutions comes in. We work with our customers to build resilience. Let me share a video with you demonstrating how we engage with our customers to better manage risk.
Climate change is already happening. We are already experiencing extreme events like, heat waves, wildfires, water scarcity in different parts of the world. The pace of climate change is exceeding the actions we take to adapt to it.
$270 billion, that's losses from natural catastrophes last year, and only $111 billion were insured. Climate-related events, primary and secondary, are growing more frequent and severe. As capacity becomes scarcer, businesses that best manage their exposure to physical climate risk are most likely to obtain the insurance cover they need at reasonable rates. That's where Zurich Resilience Solutions comes in. We work with our customers to mitigate risks and build resilience. We strongly believe that prevention and mitigation is the best protection.
We have a very asset-heavy business, which means that we have a lot of concrete, a lot of steel being exposed to rough sea and harsh weather. In the ports, as you can see here, we have a lot of cranes. We have a lot of containers stacked. They will naturally be exposed to windstorms. That needs to be managed. You can also be exposed to flooding.
Our 750 risk engineers conduct 60,000 risk assessments annually, supported by our in-house natural catastrophe modeling team. The service builds on our leading expertise in natural hazards risk engineering.
We've worked with Maersk to get an understanding of their vulnerabilities, their criticalities, the main exposures they have on site, but we also looked at where they do actually have good controls in place, and also identified some areas where they can make improvements to make sure that they have a future-proof site.
We are here to work with Maersk to identify what the current natural hazard levels are, how climate change will influence those in the future, and how they can increase their site resilience over the next years.
We help build climate resilience and reduce operational downtime after catastrophic events to help companies get back to their business faster, and we also offer this know-how to non-Zurich customers. In today's world, customers face larger losses, longer, more intensive storm seasons, and broader geographical impact. Little wonder that they're asking for a service that can keep their risks insurable.
Helping our customers manage catastrophic events also aligns with our sustainability strategy, which we will cover on the next slide. Sustainability is an increasingly important topic for many of our stakeholders, employees, customers, investors. A key focus has been and will continue to be the transition to net zero, but we can't do this on our own. Our approach starts with understanding our customers and their actions, and then from there, developing products and services to support their actions.
On the left-hand side, we have an example of the current emissions of large customers within our property portfolio. You can see a small portion of the customers contribute to a large part of the emissions, and these customers are in hard-to-abate industries. By identifying these customers, we can prioritize our engagement, and by focusing on the most carbon-intensive industries, we can better understand those industries that are gonna go through the most significant transformations in the coming years. This engagement also helps us understand which industries or, in our case, which premium pools are gonna shrink or grow over time, so we can think strategically about our portfolio. We've been developing low-carbon solutions for some time through traditional products. We provide coverage to electric vehicle fleets. We've been building capabilities when it comes to sustainable energy.
We use our risk engineering teams to help our customers properly install solar panels or the proper storage of battery risks. However, ensuring the transition is not always easy. The real heavy lifting is not in the creation of new products, but in finding ways to continue to offer the traditional lines of insurance that our customers need in order to run their business. This is with the backdrop of a dramatically changing risk landscape. Let me give you an example. Construction is an industry that we have a lot of expertise in. We have many, many customers. We see low carbon construction as an increasingly important topic. Wood is a renewable resource when sourced using sustainable practices, and substituting mass timber for concrete or steel can reduce carbon emissions significantly. Lots of good in transitioning to timber.
However, mass timber presents several challenges for insurers, including increased combustibility and really specialized construction techniques that are still evolving. Imagine building a skyscraper out of wood without a large pool of experienced contractors, architects, and engineers. That's where we are today. Zurich is one of the few insurers that's able to provide support for mass timber for those customers that have the right experts around them. I highlight this example 'cause it seems like it would be easy to switch from one building material to another, but it's far more complex from a risk perspective. Hopefully this helps to illustrate why early and direct engagement with our customers to understand the changing risk landscape is gonna be critical. On the right-hand side of the slide, it describes how we're gonna measure the transition. We're a founding member of the Net-Zero Insurance Alliance.
We've been instrumental in developing a methodology reporting the carbon intensity of the underwriting portfolio. This methodology aims to create transparency in how insurance companies report the transition to zero, to net zero. You'll see us set both engagement and emission targets in the middle of next year with the first targets to be delivered by 2030. Measuring progress is very important, which is why insights is one of the pillars of our strategy, as we will see on the next slide. As a leading commercial insurer, we have access to vast quantities of data. Delivering the relevant data to the right stakeholders at the right point in time is critical to making better decisions and driving profitability. In just a minute, we'll share a tool with you that visualizes data that we built with our frontline teams to put the data they need at their fingertips.
The information is interactive, so the underwriter can drill down in real time to see more detail. The tool highlights key risks, such as locations in cat zones or a new claim, so that the underwriters are not trying to find a needle in the haystack during the underwriting process. The portfolio management view is also critical. This view allows heads of portfolios to steer and oversee their portfolios, and we also use this information to drive progress on actions or to make trade-offs in the market. We can see if we're giving up rate to a particular broker or if there's a geography where we're struggling to increase building values. As for me, this capability is critical.
We can provide direction, but it's difficult to sit in Switzerland and to know if we're achieving what we set out to do or if we're making exceptions in too many cases without this visibility. Historically, if I wanted to see progress on something as simple as limits management, I'd have to email all the countries, have them send me spreadsheets, and then compile those spreadsheets to see our progress. By collating, summarizing, and visualizing all of the relevant data, all of us at Zurich can make better decisions about our portfolio in real time. We use these insights to strengthen our portfolio management and inform our decisions and our discussions with customers and brokers at all levels of the organization. This capability will be critical to differentiate our performance. Let us show you the tool in action.
As a leading commercial insurer, Zurich has access to vast quantities of data. Making the best possible use of this data is crucial to drive profitability and create sustainable value. Our global analytics application, built by Zurich underwriting and claims professionals, brings together internal and external data in one single platform. From an individual risk level to a customer level to a whole portfolio level across all core lines of business and functions, including underwriting, claims, risk engineering, and customer and distribution management. By collating, matching, summarizing, and visualizing the relevant data, our people can analyze patterns and insights in real time. Let's look at some examples. In liability, filtering by line of business and industry lets us review how risks across industries are driving performance, so we can focus on underwriting the most profitable trades.
Details on pricing adequacy and changes in limits allow for better tracking at portfolio level. For example, the limits of U.S. insurance programs that Zurich provides for its Europe-domiciled international customers. In property, our portfolio managers can explore natural catastrophe risks in depth and pinpoint accounts or locations that influence their exposures. They can spot trends and risks earlier, such as an increasing concentration of flood exposures in a higher risk location. This allows us to more strategically shape our portfolios. Our application also makes proactive suggestions on risk selection and program structuring. For example, the appropriate deductible level for a risk, important considerations such as the need for valuation reviews before renewal to address inflation, and alerting underwriters to new claims or significant claims developments.
We use our data to drive portfolio insights and action, maintain a profitable portfolio, and contribute to a brighter future for Zurich and our customers.
With these capabilities, we're not looking to replace critical thinking skills, and that's important. We use insights and analytics to support our people in making informed decisions. Talent is critical in commercial insurance, as we'll discuss on the next slide. As I said, talent matters in commercial insurance, and we have great people. We continue to create an environment where we can retain and attract market-leading talent to maintain our competitive advantage. This is very much a people business, and the competition for talent is fierce, and we need to be on our front foot. We seek feedback internally, and we use external data and analytics to understand what's important to be a compelling employer. This feedback tells us that we need to continue to do the things that we're doing. We're improving the day-to-day environment for our people by removing operational complexity.
The analytics platform you saw in the video is a good example of this. I firmly believe that our roles in underwriting, claims, distribution, and IPZ are both fun and fulfilling when we can get this right. We take proactive measures to evolve comp structures in a changing environment to ensure that we stay market competitive. We continue to invest in a range of development programs focusing on building the capabilities we need and facilitating career development. The good news is, this is working. As you can see, our efforts are paying off, measured by eNPS and the healthy voluntary turnover rate, despite increased competition. As we dig into our turnover data, we can see that people are generally not leaving the industry. Our challenge is we don't have enough people in the industry.
In addition to growing and retaining our talent, we need to bring more people in. Our most significant example of this is the ZNA Apprenticeship Program that was established in 2016 and expanded in recent years. I have to say that I am proud to work for a company that's creating opportunities for a much broader talent base through programs such as this one. Zurich's ability to hire and retain market-leading talent is strong. Given the importance of people in commercial insurance, we'll continue to take actions to educate our talent and to create an environment in which they can thrive. Given that people are a core element in our ability to grow, let's take a look at some of those growth opportunities on the next slide. We will continue to build on our existing customer relationships to better serve customers in the large corporate space.
We'll do this through targeted growth and increased engagement, converting more of our top market customers into relationship customers. The relationship customers make up a $5 billion segment for us, where we have strong profitability, our highest retentions, and our greatest product density. We serve these customers with dedicated engagement managers and tailored programs to meet their needs. We will focus on broker relationships. While we've continued to strengthen our leading position with the global brokers, we've also successfully increased our share of wallet with the international and regional brokers, growing our portfolio and supporting our middle market expansion. Global brokers remain our most important trading partners. Our size, our footprint, and our capabilities support us in maintaining a strong position with them. We're continuing to grow with them at a meaningful pace, achieving 8% year-on-year growth in the first half of this year.
International and national brokers are growing at a faster pace, offering Zurich an opportunity to accelerate growth in targeted segments and geographies. We've achieved 15% year-on-year growth with them in the first half of this year. Middle market, as Mario mentioned, continues to be a growth opportunity for us. We spent a lot of time going through this last year. Middle market is an opportunity to diversify our portfolio and our distribution in a segment in which we have more room to grow. We continue to make good progress. You can see the growth in the U.S. portfolio in the slide, and we've continued to grow across our key markets as well. We will also continue to grow Zurich Resilience Solutions. We will continue to grow our fee revenue, but more importantly, to help customers better manage risk.
We have the aspiration to become the leading provider of climate services, and we're off to a good start. In conclusion, we are a leading global commercial insurer in a market leading position. We've been intensely focused on rebalancing our portfolio to deliver these record results. Over the past years, we have truly built a strong foundation, and we've achieved both great results and built a high-quality portfolio that will be more resilient for the future. As we look to the future, we will leverage our capabilities to continue our success. With that, thank you for your time, and I will hand it over to our CFO, George Quinn.
I'm still a little bit taller. Good morning. Good afternoon or good morning to you. By now you've heard from three of, no four actually, of all the people who've worked on this plan. Mario talked about resilience, the approach to financial management, the ambition to deepen the focus on the customer. He gave you a preview of what this means for our financial ambition for the next three years. Conny explained the steps that we're taking to achieve that deeper focus on the customer. I've been in insurance for longer than I would care to admit, and like many of you, I'm a professional skeptic. Despite this somewhat unfortunate genetic predisposition, I've never left a meeting with Conny without feeling more optimistic at the end than I did at the start.
Together with her team, they do a fantastic job in breaking down the customer targets part of what we do into actionable, trackable, targets. She and her team push businesses just as hard on the customer targets as my team do on the financial. I said to her earlier this week that despite the minor physical differences between us, we could be twins. I don't need to say much about Sierra and the commercial team, but what they've been doing, what they've achieved, because the results speak for themselves. Many of you will remember where we've come from. Sierra's been with us for that entire journey. The transformation is exceptional. I've got a long list of topics I need to get through in my presentation. In a moment, I'll cover key messages including targets.
I'll then move on to what I think this has looked like from an investor perspective. I'll do a bit of volatility management, focusing on cats, make a short diversion into the top half of the balance sheet for a change, targets, ROE walk, some risk management across recession, inflation, social inflation, connection to reserving, efficiency, capital management, ESG, dividend policy, and then we're done. I've had the privilege of presenting the financial translation of our strategic goals in 2016, 2019, and now again in 2022. Welcome to the third act. In the run-up today, we've had a lot of advice from investors, from you, about the things that you want to see from us. I hope that some of you will recognize some of that, in what we've laid out today.
From time to time, some of you suggest that it would be hard to deliver more. You got strong portfolio businesses. You got tailwinds from commercial cycle. You got strong balance sheet. I recognize, of course, that that's a provocation rather than an invitation, and we've tried to respond to that a bit today. Starting with the ROE, we're gonna lift the ambition to target returns of over 20% or more over the next three years with the potential, as you'll see later, that we hint that maybe there's a bit more beyond that. Quite simply, our ambition is to be the highest return on capital business among the global insurers. There are several reasons why, but perhaps the most important is simply that we've got Farmers.
It's not about pure ROE optimization, but we think we can deliver more without compromising the potential for growth. Delivery of cash remains, which is one of the hallmarks of the company, flows from the other financial targets. It gives us a target of $13.5 billion. It bears repeating that there's no greater discipline in this business than having to deliver not just the accounting earnings or economic capital generation, but also the cash. EPS growth 8% starts from a base of delivery of the current cycle target in U.S. dollars to avoid that I give you a forecast for this year. It's not just about achieving high returns, it's about achieving those returns with lower volatility, and I'll cover this later in the presentation. You know where we stand on dividends, and this hasn't changed.
There may be opportunities to offer additional returns to shareholders, but dividends are our first love. This is a commitment that we make to you. The overall model is also unchanged. We set the direction, we allocate the capital, we manage the volatility down, we harvest higher earnings, we turn them into cash, increase the dividend, and repeat. This page is about how I think you view us. There are many outstanding companies on this page, also many more that are not listed here. Strong competitors are good. We try and learn from the best at every level and use this to further drive performance. We're proud of what we've achieved, but unfortunately, that was yesterday, and now we're talking about tomorrow again.
I've lost count of the number of times that we've confronted one of our businesses with the achievements of a competitor and asked why we're not seeing the same or better. Our performance reviews are challenging by design, even for our best performers, perhaps especially for our best performers. Eliminating volatility remains a key focus for us. It can seem odd that a company whose mission is to protect others, shielding them from volatility and uncertainty, would then spend so much time trying to get rid of the very thing that it offers others. There are many kinds of volatility, and not all of them are paid for. I'm gonna focus on cat exposure, especially after Hurricane Ian, which, based on the estimates from the modeling firms, appears to be the second-largest natural catastrophe loss in U.S. history.
Also for reasons that we've highlighted before around frequency and severity, cat capacity is gonna become an increasingly scarce resource in the future. It's not just about wind, it's also about quake, and we are actively managing both, even if the comments are mainly on wind. We don't view cat as a special category of risk. There's no smoothing or adjustment of outcomes. Our incentive schemes, both short and long term, treat it like any other cost of doing business. Our rewards are based on the outcomes, not the models. This next bit may sound a bit odd, but the cost of natural catastrophes is not something that's beyond our control. We don't control the weather, just to be clear, but we do control how much exposure we take to this.
We have models, we update them, we develop them, they improve over time. There's quite a bit of trial and error in this. We've decided how much exposure we're prepared to take to this particular risk type, and we're gonna make it that number. Last year, we set out to reduce our nominal cat exposure, starting in North America. We're making good progress. I think it shows up in the recent event. North America is actually well ahead of the track that we set them. As you can see here, Florida was one of the markets that we targeted, and we expect to take this down further. You can see an example of this on the slide with the very steep AAL reduction for the property business in Florida.
You also see it in a comparison of the reported share of industry loss to market share. If our loss for Ian had been in line with the average market share adjusted loss of our three main competitors in U.S. commercial, our loss would have been more than $750 million. It's not the first time that our actual loss is much lower than the market share implied loss. We've also introduced reduction targets for other regions in the course of 2022. Lower volatility is the result of specific underwriting choices, and Sierra talked about some of these earlier. Overall, though, this point is not really about cats, but it is about the decisions that we make and how this translates into loss, particularly when the market's stressed.
You see it in COVID, you see it in Russia, you see it in cat. I can't promise you that we'll always be below average for every single loss event that takes place, much less that we don't ever make mistakes. It's not about luck. It's about disciplined underwriting and the choices that we make about the risks that we will take and the risks that we won't. It's been quite a while since we've had a deeper discussion about the asset side of the balance sheet. I think that's a good thing. I think it's partly a reflection of the reputation that our investment management team has built over time, and the fact that for the industry at large, most of the stress recently has been in the other side of the balance sheet.
One of the questions that I frequently get from the IM team is whether one of you will ask a question on one of our analyst calls about the asset side of the balance sheet that's related to something other than running a yield. Stephan, who is our Chief Investment Officer, and his team, haven't really worked out that this is a compliment. That in general, it's better for you not to be interested in them. It is though a sign of the confidence that our IM team has generated. I think I occasionally present us as more passive than we are. We're not traders. We're focused on ALM. We use the balance sheet strength to avoid pro-cyclical behavior during periods of volatility. We get consistency. It doesn't mean that we never intervene, and we regularly look at stronger stresses.
If this suggests that action now is better than action later, we do something. You can see here that for what's a relatively consistent philosophy, we do intervene from time to time. This is not the tactical positioning of the portfolio that's the domain of the chief investment officer, but typically a decision made between the chief investment officer, the chief risk officer, the chief financial officer, and of course, the chief executive officer. We may have one of the lower risk portfolios amongst the global insurers, but we continue to actively manage asset risk. We've never asked IM what it would cost to deliver a given yield. We're liability-driven, and it's not gonna change. Next is targets. In fact, this is about more than targets.
I mean, our plans contain strategic priorities, investments in new business, new platforms, all with associated financial outcomes. Sometimes our success is because we follow the plan. Just as often as not, Mario mentioned this morning, things change. We can't execute on all of the elements of the plan we've put so much effort into carefully crafting. When that does happen, we focus on the destination. We're big believers that you can always get there. It's just that sometimes you're faced with very difficult choices, and we've never shied away from them. The expected outcome. We're looking to raise the bar again, return on equity will now start with a 2. As you know, a piece of this is an accounting change, but we're looking for far more than just the accounting benefit. We expect stronger EPS growth.
There are a variety of drivers, and I'll outline them in a second. Cash remittance targets increase accordingly, and the average cash remittance target. Too many targets, but you know what I mean. In this cycle is almost 40% higher than it was in 2019. We've beaten the cash remittance targets on a pretty regular basis, but we've calibrated the target here to be in line with the earnings goal at an 85% cash conversion rate. It's quite technical. ROE and EPS growth are based on IFRS 17. I know that some of you might be looking for guidance on the IFRS 17 starting point, but you can assume that IFRS 17 and IFRS 4 are close enough so that you can ignore the transition. It's not precisely correct, but it's not precisely wrong either.
You should assume that the starting point for EPS, again, anticipates the delivery of the current cycle U.S. dollar EPS growth targets, even if the accounting base in the future is a bit different. That's the destination. What about the journey? As you can see, we have also developed the ROE walk slide and nothing stands still. Apart from the IFRS 17-driven accounting changes, there's not much normalization when you look at the half year. The tax rate's a bit low in the half year, and we would expect it to be a bit higher on average, but in line with longer term guidance. It's not far away. There are very few one-offs in the half year result. The starting point is already pretty high, a pretty high bar.
Adjusting for the accounting change, we estimate the starting point for ROE is around 18%. I'm gonna focus on the ROE elements, but I'm also gonna touch on EPS growth, so I'm gonna try and do both somehow magically as I go through this thing. I prefer to avoid slipping into IFRS 17 jargon, but this is gonna be a wee bit of a challenge on a few topics, so you'll have to bear with me. Step one, I'm just beyond the half year 2022 rebased number. Several of you have already asked me about what is this item. Essentially this, if you could see the IFRS 17 variances, would be the economic variance that's gonna hit the CSM because of the market movements this year that will then earn in through time through CSM amortization.
It is relevant from ROE and from an EPS growth perspective. Moving on. I'm gonna talk about portfolio quality and business growth together. Otherwise, the whole EPS ROE thing becomes way too complex. Distinction's important for ROE, but makes the EPS thing really confusing. Think of business growth as growth, portfolio quality as margin and capital efficiency. The most significant driver is gonna be P&C. We'll drive about 50% of the total earnings growth over the next three years. Growth will slow down from where we are, but we're targeting above-rate growth in all of the businesses, but in particular, mid-market and retail. We also reluctantly assume that reinsurance is more expensive. For commercial, I'm gonna focus my comments more on the U.S. market, because the story's a bit bigger.
It's a bit more straightforward than having lots of this offset by that. You can assume that it's somewhat representative for the rest of the portfolio. We assume that the current moderating rate trend in large commercial continues over the next three years, running through 2023 through 2025, with the guidance that we've given on peak margins still applying, so somewhere in the middle of next year. Remember that rate continues to be earned in the new accounting, so the last relevant rate point is in the 31st of December, 2025. Somewhere mid-2025 will determine the outcome. Mid-market has more stable rate in mid-single-digit territory ahead of loss cost trend, throughout. Growth continues to be very strong, with mid-market growth about twice the level that we expect to see in large corporate.
From a line of business perspective, risk appetite means that property will grow a bit more slowly, as will financial lines, just because of the prevailing market conditions. We'll grow a bit more in primary liability and on mid-market motor. Crop will shrink as commodity prices normalize. This is our view. While travel picks up, you heard from Mario's comments earlier today, and those two are more or less a wash for each other. One other P&C point to highlight, and this is interest rates within the P&C business. IFRS 17 has the same, well, pretty much the same FX drivers as IFRS 4. But the factor that drives, or at least partly drives the FX headwind, the run-up in interest rates, especially in the U.S., is earned more rapidly. Meaning that under IFRS 17, we get the benefit in 12 months, not five years.
This means that the uncompensated FX headwind that we see in 2022, I mentioned at last week's call, it's about $30 million-$40 million a point or about $250 million. That's at least partly compensated under IFRS 17. It's not evenly distributed across the segments. P&C will benefit disproportionately, and that will benefit margin in future. Life growth will be lower than it has been, contributing about 25% of the planned earnings growth. Growth in mid-single digits. Our higher growth, less CSM dependent businesses in APAC and LATAM, it's important to recognize for us that we'll have life sources of earnings from those at CSM, but also PAA, also IFRS 9. Those two markets are bigger contributors to this.
While the more mature markets, which have more CSM, will grow more slowly under the new standard given the longer earnings profile that it introduces. Across the various life product types, we're looking for high single digit growth in protection volumes from a savings perspective, unit linked and investment contracts will drive growth, while both are partially offset by the run off of traditional and the small amount of annuity product that still exists in the portfolio. One additional point. The ROE benefit from the German back book disposal is also in here. But we also anticipate a modest EPM benefit as the IFRS 17 CSM amortization from this block produces lower earnings over the next three years than the IFRS 4 equivalent.
Farmers fee growth will continue to be rate driven, especially next year as the exchanges tackle some of the profitability issues in the portfolio with the aim of achieving a better underwriting outcome. We also believe that the exchanges can take the steps necessary to grow PIF. This will likely be in the latter half of the cycle. One option that we retain to support the exchanges in targeting growth if market conditions warrant it, would be further support, for example, through core share. This would continue to be tactical for us, so we'd have to come with the conviction that the exchanges can replace this capital over time. This is not in the plan. Productivity speaks for itself. Mario mentioned already today, industry cost levels are still too high, and we're aiming to take out about a further point of expenses.
Consistent with the presentation last time, we've assumed that capital generation in excess of dividend rolls up and acts as a drag on ROE. More excess capital is not among the things that we need right now. We would like to deploy the capital to grow the earnings, but there's no guarantee that we find the right opportunity. For now, at least, we don't include this in the headline targets. I'll cover the portfolio action piece in a few minutes. This bit's a bit less negative for EPS growth than it is for ROE, but it offers upside potential for both. One additional assumption topic, the tax rate is pretty much unchanged at around 24%. I'd like now to touch on resilience in the context of recession risk. I don't know when we'll have a recession.
The accepted logic seems to be that it's getting a bit closer, maybe a bit closer in some geographies than others. I can't tell you what it's gonna look like or precisely when it might arrive. We don't design the model specifically to do well in recession. We develop the portfolio to give us as much ownership over the risks that we take as possible. This tends to result in a portfolio that's less exposed to the challenges of recession than some of the more financial market asset-oriented insurance businesses. We're a global business, but we have a large footprint in the U.S. Our clients are commercial, global, local, also retail. This gives us some resilience in recession, but it doesn't make us immune. The fee business, though, is a huge benefit for us.
You can see here how our business responded during the global financial crisis, some up, some down, but the balance we have in the portfolio really helps us. This resilience together with the balance sheet strength of the group will allow us to deal with temporary challenges without disturbing the trend, and this for me is the key issue. We can have volatility, you've seen it before, but we return to trend, and we do not lose the compounding effect. Continuing with the theme of resilience, I wanted to touch on inflation, and more specifically, CPI. I mean, I was gonna say for some time, it feels like longer than just some time.
We've talked about financial repression, the desire for higher interest rates, and if there was a caveat or a footnote on that request, it would have said that we'd really rather have that without persistent inflation. Here we are. If you look for inflation effects on our business, assuming that we differentiate social inflation, you can see it mainly in property and motor. We have many forms of adjustment provision in the various lines of business and the contract forms that we write. They're generally designed to deal with activity drivers rather than inflation specifically. It's also been less of a challenge in the commercial market given the point in the cycle. Perhaps the principal effect there has been to extend the hard market. Property though is generally manageable. There is a lag.
We either have contractual rights to index, or we can deal with it at renewal through correcting insured values. You saw some of the things that we do to make sure that the underwriting process prompts us to do that in Sierra's presentation. If I focus on large property in the U.S., we are applying inflation-related adjustments to property damage and BI of nearly 10% in the second quarter of this year. We were reviewing our U.K. business yesterday. Their latest forecast is for a 5%-6% increase in insured value over the entire year, and that's significant given that the process didn't start on January 1. It's been a challenge to manage this rapid re-emergence of inflation, but our products have enough levers to allow us to do this. CPI is not the only variety of inflation that we need to deal with.
We also have social inflation. Sierra explained this earlier, and in particular what we do to track trends and equip our underwriters and claims professionals with the capabilities needed to manage the risk. Just a reminder, it's caused by the propensity of juries, mainly U.S., but not only, to make high awards to plaintiffs for a wide variety of reasons. You see the effects of it in a wide number of lines of business, but it probably shows up most clearly in excess liability. The chart on the left, my other right, shows the loss cost trend over the course of the last five years. It's worth noting that this risk factor that you see here is one of the things that's credited with driving the hard market, so it's obviously a serious issue for the entire industry.
Excess liability continues to be the line of business with our highest loss cost trend assumption, and it's been stuck in double-digit territory for some time now. There's a couple of factors that drive concern around this. First is the unpredictable nature of jury awards, and the impact that they have on settlements. Also, some very significant individual decisions tend to attract disproportionate attention, and they create deeper concerns. That, combined with the recent backlog because of the pandemic and U.S. court activity, has created concerns about what happens when this stuff gets pushed through the court system. Well, the good news is that the backlog is more or less behind us. The additional good news is that there's no sign that the trend is significantly worse, but equally, it hasn't improved either.
On the one hand, I hope that the issues created by this will encourage change and some reasonable restraint, but unfortunately, I'm a realist. We're not in control of this, but we can make sure that we manage the risk and we keep the pricing current. We try to support our underwriting colleagues on the reserving side when the risk reaches us, and we've been fortunate that we can manage some of the prior year issues that social inflation has caused through the strength of our overall reserving position. The chart on the right is a comparison of our U.S. Yellow Book disclosures to industry averages. Paid to ultimates is a measure of how quickly your reserves are turning into paid claims, a kind of survival ratio.
It's a very high level analysis, but it shows that Zurich has more years of paid claims in reserves than the industry average. Probably the only conclusion I can draw from this is that if there is a bigger challenge, we won't be the first people to face the challenge. Overall, though, that's a lesser evil story, which in the end is relatively better, but still bad. We don't stop there. For those of you who attended the IFRS 17 event in September, this slide will look familiar. I think the most interesting piece of information is the right-hand side of the slide and the breakdown of the ALAE. Here you can see at a high level what we overlay at the center to reduce the risk that reserves develop adversely.
If you look at the descriptions, you'll see several that have social inflation themes embedded in them. For the future, we also have risk adjustment under IFRS 17, and we'll think about that in the same context. Again, there are no guarantees, but we benefit from a multilayered process which starts with Sierra and her team, passes through the local actuaries, and then ending with the group's overarching perspectives on managing reserve risk. We promised that we would continue to work on efficiency, and we have. We've continued to deliver the promised expense outcome for the second successive three-year cycle, a 1-point reduction in OUE, and that's despite a very different inflation outcome from the one that we had assumed in our plan. In our operating model, we give marginal cost credit for growth.
It allows the business's autonomy in addressing growth opportunities or service expectations from customers without needing approval from me or someone else at group. We'll continue to do that in 2023, 2025. We've been shrinking the corporate center. It's about 10% smaller than it was the last time we did this presentation. We're investing in digitalization. It's about 10% larger than the last time we did this presentation. There's still a lot more to do. We continue to reallocate resources to the front line and in support of the strategic priorities. At the same time, we continue to simplify and extract efficiency. We expect productivity gains of about 1.5% per year across the group, part to reinvest, part to drive earnings growth. The overall approach to capital management is unchanged.
We have a buyback to complete, and we'll do this as expeditiously as possible. Target levels are unchanged, but you know from prior discussions that the bank book deals will make a meaningful difference to the level and width of our normal operating range. I'll come on to that in a second. The financial leverage calculation is affected by the accounting changes. These also impact the target capital structure that we previously talked about, and you'll see a bit more bias towards equity in the new target capital structure. I highlighted the cash generation earlier. There's not a lot more to add. We have frequently outperformed targets on cash, and we've reverted to the longer-term cash conversion goals for each of the segments. This doesn't include some of the one-off opportunities that still exist in the portfolio.
It doesn't mean that we won't go after them. It's just they're not in the target. Managing capital volatility, as you've heard already from Mario in the first presentation today, it's been a key focus for us, particularly during this cycle, and we've announced several transactions that will transform capital volatility. I think we've known for a long time that this is something that we have to tackle, and there's been several times in the last 30 months where I wished I'd done it earlier. Now that we have though, part shows in the formal sensitivities, but that's blunted by much higher interest rates. The annual disclosures don't show the full effect of the low points. Credit does show up, but it's more straightforward. Again, the left-hand side is what the model says from today's levels. Middle and right, sorry.
I can't do left and right. I give up. My other right, i.e. my left. Middle and left are what we actually lived during this period. I think the most important point to take away from this are the target capital requirements. The German and Italian life books were responsible for an increase in the group's capital requirements in 2020 that was equal to the increase for all of the remainder of the group. The benefit of the sale is that we can't have that again. The numbers from an internal capital perspective are even more extreme. This is not hundreds of millions of dollars. It's billions. Capital allocation. It's at the heart of how we do performance management. We look at a wide variety of metrics. Some of them are economic, some of them are just common sense. You can see some examples here.
These are all individual portfolios within our existing businesses. It's not individual countries, but components of them. I mean, if you look at this and you look at the top one for life, I mean, we like to use economic models when we can, but I don't need an economic model to tell me that if you have a low IRR and a long payback period, you probably shouldn't be here. Equally for the P&C business, I can see blocks. Certainly, I can when I do the more detailed version of this and put a bit more numbers on the chart than I have here. They just don't produce a high enough return on capital to justify the investment. These are plan numbers. It's not the historical outcomes.
The challenge is that it's really hard just to turn, flick a switch and turn the problem off. Typically we need a structured solution to most of these things. If I look at the drag created by the businesses that I don't think contribute enough, it pulls down the group's ROE by 2.5 points. Experience tells us that we can't close the entire gap. I think there's another point of ROE in here if we can extract the capital and redeploy it in the cycle. ESG is such a critical topic. I mean, it's great to see the increased emphasis from investors over the course of the last several years. It's been an important topic for us for a very long time. We made some of the earliest commitments on the investment side starting nearly a decade ago.
I focused here on how we report, how we create credibility, confidence in the targets and the steps that we take to achieve them. We do though need to navigate an ever-changing landscape in terms of investor expectations around disclosure, but it is good to see the first steps of the ISSB and the fact that they're building on something that we already have. Probably the most important thing for us is that irrespective of the disclosure requirements, we want to tell our story. We've decided on our priorities. We've chosen the topics that mean the most to us, and we're working with clients, individuals, institutions to make as much progress as we can as quickly as we can.
We do it because we want to make a difference, but it is nice to be recognized by MSCI with the highest possible rating and as a leader in insurance. You've seen this before. We believe this works for us, and more importantly, it works for you. Dividend policy is unchanged, 75% of sustainable NIAS. Last dividend paid is the floor. In conclusion, you can read the key messages. I'm not gonna repeat them. I mean, I'd love to tell you that we developed the strategic priorities, we do everything bottom up, the organic plan, planning process happens, and then the numbers just flow out somehow naturally. But I suspect you know that's not how it works. We've known for quite some time what the targets today are gonna be. We don't have revelations for you. I don't have fireworks.
I mean, what we can promise though is an unrelenting drive to make the organization better. We offer consistency and execution, and we promise that we'll never be satisfied. When we've delivered this, we'll look for a bit more. We're 150 years old and 25 days. I think we're just entering our prime. I think we're gonna take a short break before we start the Q&A. We're gonna take 10 minutes. 10 minutes, please, and then we'll be back for the Q&A. Thank you.
Words. When it comes to making a difference, that's all anyone seems to offer. Our world needs actions, not just words. People are eager to make a positive impact. Tech giants and FinTechs have disrupted insurance and raised customer expectations by offering hyper-convenience. People want more than convenience.
Hmm.
Our customers want personalized experiences, services, and products tailored to their needs, and they want it all driven by a purpose they believe in. Our customers want a partner that will amplify their efforts toward positive change, and Zurich has what it takes. As one of the world's most reliable and stable companies with a long history of success, we have the strength and scale to redefine insurance for the 21st century. It's time to think beyond competition and collaborate with other game-changing brands. Most importantly, it's time to collaborate with our customers. By facilitating new communities for peer-to-peer and expert advice, we can involve customers as active participants and help prevent things from going wrong in the first place. Prevention isn't about us and them, it's about everyone working together, empowering all of us to be part of the solution.
Providing peace of mind that what we are doing makes our lives more sustainable, healthy, and secure. Building confidence that you are doing the best you can to protect yourself, your family, your business, and the world. Together with our customers, we can become a force not only for good, but for optimism. We can drive positive progress and move beyond words, because there is an activist in all of us just waiting to spring into action. Create a brighter future together. Zurich.
My name is Alain Lagesse. I'm the Group Risk Manager for Louis Vuitton Moët Hennessy. I can think of five or six reasons. The financial strength of Zurich, probably the number one. The global reach of Zurich and its network. The quality of the Zurich teams with whom we work. They have a full servicing capability doing all aspects of servicing of our accounts. A broad risk appetite, so presence on several programs, and transparent communication with our account managers and senior leaders. A couple of years ago, on a particularly difficult property renewal, we were able to get Zurich for a sizable participation after two months' debate with the underwriting team and some particularly transparent communication.
We were able to structure a pretty customized solution that helped us complete our placement and also help manage the risk, the cat risks for the Zurich underwriting team.
We all have a role to play in protecting our planet for future generations. Whether our contribution is large or small, it's a choice we make every day.
I pledge to reduce waste. To move to a more plant-based diet.
I pledge to use less plastic and start recycling more.
Curbing climate change is the greatest challenge of our time, and it will take all of us to stop it. At Zurich, we believe individual contributions can add up to something much bigger. That's why we want to inspire and empower our customers, employees, and our communities to take action with us, because together we achieve more.
A company like us has to act, has to do real things. The climate can be improved if we all start doing the things that we can and we want to do.
Tackling climate change needs allies. Zurich is mobilizing for climate action through the Zurich Forest Project, launched in Brazil in 2020. We have partnered with photographer Sebastião Salgado and his wife Lélia, founders of nonprofit Instituto Terra, to help restore a portion of Brazil's Atlantic Forest to its natural state.
We must come back to our planet. If you want to survive as a species, we must come back to the planet. We must rebuild parts of the planet that we destroyed.
The Zurich Forest Project aims to reverse the damage inflicted by decades of cattle farming and logging. It helps to make environmental topics like nature restoration and biodiversity more tangible. "A forest," Salgado says, "is not a single being. It's built over many years, tree by tree. A tree is a shelter for other creatures. It holds the soil together and catches rainwater. It's perfectly attuned to the seasons.
The environment, the biodiversity is local. We are planting a forest in Brazil. We are using local species because the biodiversity, the ants, the termites, these insects, the snakes, the birds, they love only the essence of the region. We must replant the forest. We must rebuild part what we destroy.
We decided to give a tree to every employee to make everybody aware that they have a role, that they have something that they have to do themselves, that their commitment is important. That tree is a call for action, to each one as an individual to continue doing what the planet is asking for.
At Zurich, we want our work to inspire people to take a stand for nature. Our new global headquarters in Switzerland is one of the most sustainable buildings in the world, and we aim to implement a sustainable buildings program in an additional 50 offices. We've set ambitious carbon emissions targets for our investment portfolio while also curbing emissions related to underwriting. Our global operations have been carbon neutral since 2014, and we aim to achieve net zero emissions by the end of this decade. We're cutting air travel-related emissions by 70%. We've cut paper consumption, eliminated single-use plastic, and we're turning our car fleet into 100% electric vehicles, and we are committed to using only renewable power worldwide by the end of 2022.
This is the beginning of a long wave of actions to make the planet sustainable. The others also will take their actions and initiatives, and if all of us on the planet do our contribution, we can save it.
My name is Daniele Zucchi, and I work for the reinsurance captive of Saipem. Zurich is extremely relevant for our business. Since more than 25, probably 30 years, Zurich supports the activity of Saipem's worldwide. Saipem is present with physical presence in more than 40 countries worldwide, and Zurich always managed to assist the group in the placement of local insurances and of course, the cession into the captive.
Buckle up and swoop in from the shores Quai Zurich Campus. Welcome to one of the most sustainable corporate headquarters in the world. From every angle, it reflects how we've evolved and who we now are. While the original building dates back to 1900, today the entire campus is more than just a place to work. It's a home for our community and a key part of Zurich City's cultural fabric. The historic entrance is a testament to our rich past and remains at the heart of the preserved building. Our first boardroom has been restored to its original state, including its wooden floors, wall paneling, carpets, stucco ceiling, furniture, curtains, and even the wallpaper. The Zurich campus has come a long way from its origins and is now an elegant statement on the importance of physical spaces in an increasingly digital era.
The modern prism glass facade is an eco-friendly architectural landmark and a key contributor to reducing energy consumption. Its smart window panes help control temperatures inside. It's the ideal setting for employees, customers, and visitors to meet, collaborate, and discuss fresh ideas. Modular furniture adapts to create the right space for everyone. The campus also features spacious meeting rooms where we gather and where ideas grow. Zurich is making the most of innovation with 2,000 smart sensors monitoring air quality, people flows, workstations, and much more. Sustainability Quai Zurich Campus. A third of our open spaces have greenery, a climate-friendly solution that includes cacti and other plants that capture CO₂. Solar panels generate electricity, and we collect rainwater for our sanitary systems. Lake water circulates through pipes hidden in the ceiling for heating or cooling.
To drive home our carbon neutral commitments, the campus garage offers parking for electric cars only, while our fleet is already 100% electric. To maintain a good work-life balance, employees enjoy spacious and state-of-the-art wellness facilities on site, open 24/7. Sustainability is also about eating clean, and Alfred's Kitchen offers various healthy, tasty, and locally sourced dishes. We can help fight food waste by buying leftover meals and taking them home for dinner. Nearby is the K Cafe, which is also open to the public. It's the place to go for that perfect morning cappuccino, a tasty business lunch, or a relaxing Quai Zurich Campus, a place with strong values rooted in a successful past and open to creating a brighter future together.
My name is Lars Henneberg. I'm the Risk Manager at Maersk. Zurich is instrumental in the execution of our strategy. They provide fronting services for our captive, which allows us to distribute the capacity of our captive into local territories. They also help us understand and manage our property risks through loss prevention surveys and climate resilience surveys. They also support our insurance products that we offer to our customers. Zurich is a long-standing and trusted strategic partner. Zurich is always available and responsive and keen to understand our needs.
Welcome back. Home straight Q&A session. We're gonna have an hour for Q&A. We'll give priority to questions in the room. We've got some roving mics. We've got Joe and Patricia on the mics. If you raise your hand, please, then I will bring you a roving mic. If we have some time, we'll take some questions for the webcast. We've got the four presenters who will be happy to answer questions. Maybe Michael, start off with you.
Thank you. The first question is, you know, the things on the right-hand side of the ROE walk. Can you say what they would be in EPS terms? The second question is, yesterday we had calls with four of some of your peers in Southern Europe. Motor, the impression I have is actually getting worse. It's not getting better in terms of reported numbers. Obviously, the underlying may be getting better in terms of pricing is a bit better. But basically for me, it, the comment was there's no improvement until 2024. I just wondered if you can, given that maybe more darker background, if you like, can you explain how confident you are of achieving your retail kind of margin implicit target? Thank you.
Right then. I think I'm gonna take both of those, Michael. On the right-hand side, we've given the equity numbers elsewhere on the deck. I haven't tried to calculate an EPS. I'm not gonna try and do it 'cause I'll make a mistake and promise something that we can't actually deliver. You know what a point of ROE would be. If you use the equity numbers later in the day, you can translate it into EPS. I mean, the only change in share count that we've assumed in the model is the buyback that we've previously announced. Everything else is assumed stable. On motor, I don't think we share the view. The...
I think I said at the half year that didn't expect retail to get better this year, and it could get worse this year before it gets better. It's only when we look at our key markets as we enter next year, we expect to see improvements start early next year. We were with the Swiss business about two weeks ago, talking to them about what their plans are. It's clearly an improvement over where they are today. We expect to see retail. I mean, different markets are in slightly different places, but overall, you'll see the markets that are most impacted start to turn, we believe.
Andy.
Thank you very much. Andy Sinclair from Bank of America. Three questions if I may. Firstly, just on life remittance. Saw that you're looking for remittance of about 75% under the new plan. A little bit lower than the 80% over the last plan. Just wondered, back book management, how much is that making a difference? I might have thought remittance might actually have improved a little bit, or is IFRS 17 causing a bit of noise in there? Just to understand that 75% figure. Secondly, it was just on the base for the EPS target. You've told us it should be the previous target rolled up at 5%.
Fine, we can calculate that, but I think consensus is already a bit ahead of that for 2022. Just really wondered, will that be rebased when you actually publish the number, or should we just take that 5% rolled up as kind of cast in stone as the base level? And thirdly, just wondering if I could ask Sierra, how higher investment income is changing your thinking and discussions both internally and with clients.
The life remittance topic. I mean, there's no substantial change in what we expect to see by way of the ability of the life business to remit cash. At the margins, and I really mean at the margins, the German transaction is a small negative. Unfortunately, dealing with the capital volatility that Germany brought us didn't bring us positive contributions for all metrics. It was a relatively stable provider of cash. I don't see a significant difference on the life outcome. I think the other thing to be careful of course, is, I mean, these are actual. Here we're running the model at the moment.
We've relatively regularly beaten cash remittance, but we've tried to keep it here consistent with all the other metrics on the page and not have them completely out of sync with each other. Germany at the margin, probably more significant the fact that we've reverted to the longer term assumption rather than the more recently delivered numbers. Sorry, basis for consensus. Basis for the EPS starting point. I mean, I remember having to do this in 2019. I did something different in 2019, but it causes just as much confusion. What I said in 2019, it will be off of whatever we print. That's even less helpful than what I've said today.
If the basic question is, am I gonna change the guidance once you've got the actual numbers, I'm not planning to, no. It'll be off of where we are today. Sierra.
I think your question was, how much of our conversation centers around the change in investment income. You know, there is a hope with customers. I mean, there's a fair amount of fatigue in the market right now as we speak with customers and brokers. I mean, we've had quite a number of quarters of increasing rate, increasing prices, changing terms and conditions. They're hopeful that that could provide some relief, but it'll work its way into pricing eventually. It really depends on the different lines of business and the dynamic that we have going on. There's many drivers of profitability, so that will be one of them, but it's not the primary discussion that we have with customers.
Andrew, on the pile. Sorry, Joe, in the pile here.
Hi, it's Andrew Ritchie from Autonomous. A question for you, Sierra. Is it possible the growth could be higher in commercial in 2023, even with a softer rate environment? I guess what I'm thinking is there's quite a lot of inflation indexation effects that will not have been reflected yet in your numbers. I'm thinking because, say, there was beginning of the year renewals in 2022, where there's gonna be a big uptick or even things like work comp, which is a bit lagging in terms of payroll. So I'm interested in that. Is it feasible to think commercial growth can be higher, even in softer pricing? And linked to the growth, I didn't see any mention today. I think Mario might have mentioned it.
I didn't see any mention in your presentation about A&H, which obviously has been a growth area. The other question. Sorry, Sierra, it's probably for you again. You're growing a lot in non-top three brokers. Some of those smaller brokers, regional and nationals, are quite strong in E&S. Some of them are quite strong in a lot of delegated authority type business, you know, the MGAs, et cetera. Can you just reassure us on how you fully audit anywhere where you're delegating your authority? I suspect delegated authority business has grown faster than the overall book, but maybe tell me if that's not true or not. But you presented some great indications about how you're holistically measuring risk. I just wanna get a sense that you're managing to do that where you're one step removed.
The final question is for Conny. Maybe this is a bit harsh, but when I looked at slide 12, it's the customer-centric slide, I think it was. Maybe I'm impatient. I would've expected that to be rolled out a bit more quickly. There's a graph there which shows the rollout by P&C and life, and you get there by 2025. A lot of those, it looks like you've laid the groundwork already. I'm maybe tell me why I'm wrong to think it can be done more quickly than it appears to be being done.
I'll start?
Yeah.
Okay. I think your first question was 2023 and what we see there. We'll continue, you said soft rates. We'll continue to see rate in 2023 across the portfolio. We will see growth from valuations, as you mentioned. I think George indicated that, you know, we're just getting started with that. We have more work to do there, and we'll see that coming through our portfolios. As you mentioned, in workers' compensation, we do adjustments. Then as we see wage inflation, I mean, we price many of our lines of business based off payroll or revenues, so we would continue to see some growth off the back of that. You asked, I think, next about inflation. If I miss a question, just let me know. About A&H.
I did have a slide on A&H.
Yes.
Showing that we have grown
We're up 28%.
We're up 28%. You know, we expect travel to come back, as we talked about. We will see growth there. We also see evolving needs from the gig economy, and we've had some success in that space as well, so we expect to see continued growth in the A&H space. Then you asked about MGAs. We take a very cautious approach with MGAs. We have a very robust onboarding process. We have onboarded some MGAs that have brought some growth, but we've also exited some others. I mean, we exited a relationship that we had in the sustainable energy space to insource that talent and to grow that portfolio on our own. We do a bit of both. We do audits of those portfolios, and we manage those very closely.
Andrew, as in the past, I mean, growth is not a target for us. It is the profitability. It is the sustainable development of the relationship over time. We don't join and leave these programs. I mean, just we do it when we're convinced, and otherwise we stay away from that. There has been a lot of movements in the broker world after the past couple of years. Definitely the regional, the national brokers have gained space against the global ones, maybe because the consolidation went a little bit too far, and that opened opportunities for local brokers to grow. We went naturally into more relationship with them.
Okay, on to the customer centricity question. I understand your impatience, so are we. It is actually a more comprehensive process that I described on the slides there. It looks like, oh, you just go in, you do segmentation, and you change how you do things, and that must be fairly fast. We actually work with the markets over a period of three to four months to establish what is the data reality, how are we loyalizing customers. Then we're doing the external segmentation. We're then measuring where we should be focusing, what segment, where are the opportunities. We still have to digitalize the agent's journey if it's not digitalized already. We need to link all of this into their systems, so they get it served up in the right way.
When we stop the pro-project together with the BU, the BU has an implementation plan that actually lasts for the rest of that year before they start seeing results. Also, when you change the remuneration for the agents, that follows a certain process. It's not like you tomorrow can swipe, what is that called? The blanket away under them. You really have to go through the process, train them first, make them understand where you're going with it, and then implement it in their systems, and then change the remuneration. We're doing it right. We're doing it in a solid way so that it sticks. We're not about rushing in there, doing something fast, and then backing out. That's really the story behind why it takes time.
The big businesses have been approached already. Farmers Switzerland, Germany, and bancassurance have been. Bancassurance is the last one, but we started from the big ones. We wanted to hit the biggest benefits at the beginning. We didn't start from the small ones.
In every project, we also add another complexity. Going to Brazil, within adding the broker perspective as well, which is a little bit more remote, and then we add the affinity perspective. The project doesn't stay the same. We get more and more refined per market.
Yeah.
It's live in Germany and S witzerland.
Okay.
Farmers is in progress.
Yea h.
Yeah.
We're doing the segmentation in S.
In progress to becoming live?
In progress to becoming live, yes.
Same row, Will. Please.
Thank you. Will Hardcastle, UBS. I'm gonna give Stephan what he wants, first of all. Is it more likely you increase the fixed income weight relative to equities? You know, given the spread between the two's changed so much, and how should we think about capital charges and volatility on your targeted capital range in that respect? Second one, just thinking about the 250% + SST, and you've maintained that 160% base level, the gap's presumably at close to historical highs. Do you see a higher likelihood of inorganic options at this point in the current market or less? And I guess if there were to go down the inorganic options, you've talked about the mid-market opportunities, the retail opportunities. Are we differentiating between organic growth on that side, or would they be more likely the inorganic options as well?
Are you giving yourself a timeline of deployment or not? Thank you.
Yeah, that will teach me, won't it? At least now I do that. I need to make sure he's actually in the room so that I can do it. Just to reiterate the process that we go through when we think about capital allocation to IM. I mean, as I explained before, capital first goes to Sierra, to the countries on the underwriting side. That's the highest priority allocation we have. What we then do with IM is, we're looking for an ROE optimization for a given risk level, and that will determine a risk capital allocation to IM. If you look at the history of this over the last few years, I mean, if you look at nominal SA, it's been pretty stable.
They've maybe taken a bit less credit, a bit less equity tactically at various points in the cycle. They've had some huge passive breaches of the capital allocation because of market movements. As I mentioned before, we use the strength of the balance sheet so that we don't get forced into, I now have to sell this thing at a point you really wouldn't want to sell it. What does it mean from here from an asset mix perspective? Well, I mean, the challenge is the fundamental process starts with fixed income. That's always gonna be the largest component. We're always looking for, I mean, something that is the best risk, closest to risk-free replication of the underlying cash flows from the insurance product. And then the team will then mix in things.
For example, privates, to try and capture some of the liquidity benefit that we get on the liability cash flows. In terms of changes, Mario talked about the fact that we'd like to put a bit more emphasis, so you see a bit more equity in the portfolio. We'd like to raise that over the course of the next three years. We think that fits with just the general trends in the markets, fits with what we want to do anyway. Part of the asset mix will be determined by, if you look at the life business, we're trying to push protection pretty hard. We're looking for high single digit growth rate in protection over the course of the next few years.
We're also trying to introduce some new elements into the non-guaranteed savings part of what we do. Either the unit linked or the investment contract piece. There you'll see us introduce. Mario mentioned some of the sustainable product innovation that we have. There's clearly demand from our customer base for more of that type of product for it, and we'd like to offer more of that. That's not a proprietary risk that the company holds. I think if you look at it overall from a Zurich-wide risk perspective, I think relatively modest changes driven by some of the strategic priorities.
For the life business where the asset risks typically sits in someone else's hand, again, driven by what we think the ask from the customer is over the course of the next three years. That was such a long answer. 252%, I mean, one of the benefits of having. I mean, Zurich's had a strong balance sheet for about as long as I can remember. Almost as long as I can remember. That's meant at various times that when things come up, we can explore whether they make sense for us. I think the challenge, and we've had the discussion throughout the day on the side, is that, so what would you like to do? What would be ideal?
We do the other things, because the other things are the actual things that are available to us. I mean, we don't set the plan based on inorganic, which is why on that ROE walk, some of that stuff sits out to the right-hand side, and we don't pull an M&A necessity into targets. If you look at the history of the last six years, we've sold some businesses, we've bought some businesses. In general, we think that's been positive for shareholders. Not everything was perfectly timed, perfectly right, but the net we think is a positive.
If the opportunity presents itself, we'd like to continue to do the same thing because the most important mission we have, apart from the stuff that Conny and Mario talked about, is to try and maximize that earnings number and deliver an even higher dividend to shareholders. It's not a requirement.
Dom in the front here, please.
Thanks very much. Dom O'Mahony, BNP Paribas Exane. Just first question on Farmers. I think on page 17, you showed some really fabulous price increases coming through. At the same time, the GEP number is, I think, sort of low- to mid-single digits. I think the implication is that volume is expected to reduce relatively significantly in the short term. Is that the right implication, or have I missed something? The second question is on life remittances. Why shouldn't life remittances be sort of structurally higher? The reason I ask is historically, as I understood it, for the industry in general, life remittances are usually lower because if you grow into capital intensive products, you have to retain some earnings to cover the growth in capital requirement.
A, you folks are less capital intensive in terms of your life mix, and B, IFRS 17 should mean that the profit signature is closer to the release of capital. Why shouldn't it be more like P&C, you know, some 85%+ , cash conversion? Third question, I may just be being slow on this one. In page 60 on your ROE walk, equity build, I think it's 2 points drag. Is that essentially an equity build that would be needed to maintain the capital ratio to sort of, you know, as you grow, to maintain the capital base? Or is it sort of the build over and on top of that?
I suppose what I'm really trying to get my head around is, you mentioned earlier, you know, that the release from the back book disposals is not in the hundreds of millions, but in the billions. Is that extra capacity over and beyond sort of an organic build over the planning period? Or is that organic build essentially to maintain the capital ratio? Hopefully that question makes sense. Thank you.
It does. Yeah. Let's do them in order of speed. Number three, extra. Number two, I think you're almost right, but the challenge we've got is that you've still got a number of markets, and we're in several of them. Even in protection-oriented markets, they've still got relatively outdated local capital systems, and growth can be a bit. I wouldn't say punitive. But I know, for example, that I've got one market. We like the market, we like the products, we're right there. They have decent growth, but that growth comes at a reasonably substantial cash cost. And we tolerate that because we like the returns within the overall portfolio. On Farmers, I mean, really the reason you see this difference is a combination of.
I mean, we talked already about the challenge that the Exchange has got on the underwriting outcome. It's clearly not acceptable to them at this level. They need to do something about it, and it's easier to do that in a rising market where price is rising, which means you won't see from a Zurich perspective the full benefit of the headline rate because there'll be some underlying pruning taking place to get a better foundation. That's it from me.
Yeah. The other thing to bear in mind on Farmers is that, these very strong swings of rates, they're not really beneficial to grow the policies in force. You don't really capture a lot of new customers at the time at which rates grow double digit. Right? Now, so far, the experience has been much better than in the past years. If this continues, there will be also leakages, right? It would be better that, the market will stabilize on some relatively average rate growth and some good profitability. In order to achieve it, there will be some bumps where also some portfolio will be pruned and some customers will be lost.
Okay. William.
Thank you. William Hawkins from KBW. Among the wealth of great initiatives you talked about for retail growth, the one that you didn't talk too much about, to my mind, was the simple opportunity to cross-sell from your corporate relationships down to the retail customer base that sits beneath that. I'm just kind of wondering, you know, why is that omitted? You know, a lot of companies actually say in reality that the practice of doing that is hard and you don't get very good customers. I'm kind of thinking, you know, given that you do have very strong corporate relationships globally, is there an opportunity to grow retail by cross-selling from that? If so, where do you see the opportunities?
Secondly, please, George, I'm still finding it hard to get comfortable with the required capital that's now in your SST ratio. If I take target capital ex risk margin, that seems to be now below $15 billion, which, for example, is less than 50% of your non-life net earned premiums. I mean, historically, we've always argued that SST is lovely and conservative and the rest of it. But, you know, to me, given that your ratio has moved so significantly because of a massive decline in required capital, your required capital figure to me just seems strangely low. So could you help me understand that?
I'll take the first one.
Okay. I'll take the second one then.
Yes. Look, we do see an opportunity for developing the relationship with the employees of the companies. However, we see that in specific markets. U.S., now Farmers has equipped itself with a very good workforce management platform, and so they count on growing it and they count on developing that business. Switzerland is doing it and can do it more. There are a number of other European countries where we can do it. In general, this is not a global action that we can take, because in some countries we simply do not have enough of the retail services available. There are a number of countries in Europe and in the rest of the world where we are very well prepared to serve the commercial customers, but we're not equally prepared to serve the retail customers.
Meaning that we don't have, you know, the broad and needed distribution for example, for claims, or we don't even have the pricing capabilities for them. So it's a relevant thing. It's a priority in focus markets at this moment. As always, we like to talk about the achievements better than announcing plans. You might hear something more about it over the next years.
On the SST numbers, maybe a couple of things. I mean, SST is far more mark-to-market. I think in a more positively oriented mark-to-market environment with higher interest rates, I haven't tried to measure it 'cause we don't do Solvency II. I mean, it's not inconceivable you get a bigger benefit or a bigger delta compared to the starting point to Solvency II. It's not really premium volume driven. It's obviously a risk-driven function rather than simply the headline premium numbers. Bear in mind that you need to be careful with captives, so just be a wee bit wary of things like net. I mean, I think as we discussed at the Q2 set of numbers, it's pretty academic anyway. Because I think if.
I mean, let's face it, what is the funding requirement of the group? It's me adding up all the local capital numbers. SST is a guide from our perspective and from a regulator's perspective on the total risk requirement and the capital requirement for the overall firm. But I can't quantify that implied difference. I guess that's not a surprise. I mean, if you look at the 262% or the 252% against the 160% and what that would imply for capital release, I'm gonna hit several constraints before I get to that number. Having said that, I mean, what I don't want to do is to give the impression I think this is; it's not a meaningful number.
I think particularly in a stress environment, we like the mark-to-market nature of this because I think it keeps you honest. It doesn't have some of the features that we see in other regulatory regimes where spread is not risk, or there are interest rates in the regulatory model that don't exist in the real world. I think the fact you've seen a much larger delta may be explained by the more mark-to-market nature. In the end, it doesn't change anything from an operational perspective, 'cause the flexibility we have is defined by the cash that comes back in more than the headline capital number. It's good to be 252% rather than 160%.
Alan, just here, Patricia.
Thank you very much. Alan Devlin from Goldman Sachs. I have a couple of questions on the customer presentation in the morning. First of all, what was the key priority for you guys? You know, the pyramid you showed showed the kind of products per person or per customer, you know, increasing at the higher value customers. Is that really the key kind of benefit for Zurich? Is it can a cross-sell higher product per person, or is it more, I think earlier in the presentation you mentioned, you know, the benefits of higher retention and higher lifetime value and better underwriting. I just wonder if this is a cross-sell benefit or a higher retention benefit.
Secondly related, I think you said in the pricing to factor in customer loyalty into the pricing. I suppose insurance in the past, there's been a kind of a loyalty premium for customers, and the U.K. had to legislate against that. I'd just be interested to hear, you know, what you mean by that statement. Thanks.
Can I make an introduction and then pass it to Conny? My colleagues know that I find cross-selling a terrible word because a customer does not want to be cross-sold, a customer wants to be serviced. What we're trying to do is to understand what the customers want and then provide them solution. We really refuse to push our salespeople to cross-sell to the customers because that would be almost the opposite of what we're trying to do, which is kind of delight the customers with the service that they do not expect. As Conny showed this morning, I mean, eventually, we wanna get to the signature kind of customer experience where they get something that they really did not expect from us, which is almost the opposite of the culture of let's go and cross-sell things to them.
Sorry for that, but my colleagues know very well that every time I hear cross-selling, I stand up and say, "Don't use that word, please, and don't think that way." Sorry. Conny.
Yeah. That's exactly how it is. We focus on retention rather than cross and upselling. Having said that, by actually doing the segmentation, we of course get to understand the needs and the preferences of each customer, and part of our role is still to service those needs. The conversation the agents will have is also about what other products are relevant for them. What we wanna avoid is that, okay, we have these two things on the shelves, which one is it you would like? You know. Much more starting with the understanding, starting with the dialogue. As I said, it's about loyalization. It's really about being the best at servicing these customers and their needs, and then demonstrate that we can be the loyalty leader in the industry.
That starts with understanding them and working with them in a much more one-to-one kind of way than we've done before. The reason why it's profitable is because they stay longer. So we're loyalizing, and we don't have the same acquisition costs, so they're more profitable. We also know that they have a lower loss ratio. There are many benefits of actually loyalizing your existing customers that are also financial. The extra side benefit we're also hoping to gain by actually delighting them is that they'll start recommending Zurich to others. I'm looking forward to the dinner party I'm going to where I'm sitting next to someone, and they'll be raving about the Zurich experience rather than complaining. That's really where we're going. We are a premium provider.
We should be delivering a premium service and a premium product. That's what we're striving for.
Claudia.
Thank you. Claudia Gaspari, Barclays. Building on, I guess, Alan's question and Conny's reply to it, can you give us a sense of how much the lifetime value of a customer increase is?
Mm-hmm
With the number of products going up? Basically, can you link your world, Conny, to George's world? Which, you know, I understand NPS 'cause it's a bit, you know-
Yeah. Yeah
...for us, those metrics matter a lot. In particular, depending on, say, a customer that stays three years plus and a customer that buys, I don't know, three products or however you want to set the threshold. The second question, Nat Cat budgets. I mean, I understand it's very difficult, but you know, if I want to be cynical about it, we look at the past five years, and the industry has consistently blown through the Nat Cat budget, so it's not Zurich specific. Have we come to a point where budgets need to be set just looking at the last five years because the world is such a different place? How do you think about your Nat Cat budget going forward in absolute dollar terms, but also in your ability to kind of not blow through it?
Claudia, I'll try to address your question, and then Conny can, of course, jump in and add. No, we cannot do that in general because we don't like. Let me put it this way, a hypothetical number. We refer on purpose to BOP. What we know is that Switzerland, who has been the early adopter of this, has a BOP increase as a BOP support by doing this, and this is cash. This is something that we see. Of course, if we model what's gonna be the lifetime value of this, we get to a much bigger number, but it would be a hypothetical number that we cannot spend, we cannot pay dividends with.
We enter into the discussions like, you know, the ones on life in the past years where people start not being sure about is that real or is not real. We really don't wanna get there. We can think some BOP in cash, and we're sure that this is accretive and this is also what the countries say, and they do it because they see the benefits. I don't think that we will ever come to you and present, you know, any big numbers saying, you know, consider that this has been the change in the customer value over time because we know that you guys will be, and rightly so, will be skeptical about it.
There's also a danger in. Although I should start with saying we actually do work a lot together with finance, and we have the same intention on getting closer to some of the answers you are asking.
Yeah.
We're constantly looking into it, but some of the customer numbers can be influenced by many other external factors. If one of our competitors runs a huge campaign, then our brand consideration will change, the placement of that. There's so much or a price change or a new promotion. Many other factors are influencing these numbers, so you have to take it with care. Of course, internally, we look at it all the time. We also devise the targets for the markets together, looking at how much are we looking for in revenue and BOP growth, and how much are we looking for in customer growth? It's a constant conversation. As George says, we're basically twins in our approach to this.
It may be worth adding that if you go back about eight years, Zurich had a customer lifetime value measure that was completely unanchored to anything.
Yeah.
It's just not worth anything. 'Cause I think, I mean, the key thing is you have to demonstrate that this somehow translates into something. There's plenty of people who can model the thing for you and tell you what they think the answer is, and that's not worth much.
Can I add? There are lots of interesting issues that are coming to our attention. Conny had in a presentation a reference to pricing. Now, we don't know yet what is precisely the impact of pricing on the individual elasticity of customers. Now we profile the customers, so we know pretty much, at least in the countries where we have done it, where the customers sit, who they are, right? We know from their profiling, we know their preferences, so we think we understand that. We don't yet understand how they react to the different proposals that they get. We believe that there will be surprises when we look at that. Customer elasticity is not gonna be linear or homogeneous across the buckets of customers.
Maybe it will also vary by, you know, market situation, by different times. These things are very, very important to understand because you don't necessarily have to make an actuarial price. You have to make the right price for the customer. What is that meaning is not yet fully obvious, because we're still lacking some data. There are lots of very, very interesting new developments that make this really a lot of fun, as I said, and really very promising. We don't have yet gone the full journey to that, and we'll get better along the way.
Nat Cat budgets.
Mm-hmm.
It's interesting. I was reading the notes after last week's call, and one of you has got a chart in the document which shows the actual experience for us. It's not an industry thing, and it's got a moving average line. Our head of performance management is in the back of the room, and she shows pretty much exactly the same chart to the Executive Committee and the Board. Of course, we look at that, and we don't like it. I think the challenge with this is that you need to be clear we don't kick in a new type thing where the answer will be the following. 'Cause we can only really control the input side of it. What you've seen us do is to respond to this run-up.
We've seen whether it's randomness, climate change, whatever it is, some combination of all of this, and start to take the steps that we know will bring it down eventually. It's gonna require a wee bit of trial and error, but we try and force it through the system. We started last year. We can see the benefit in the U.S. already, albeit in another heavy cat year. We can actually see some benefits outside of cat. I mean, it looks as though at the large end of commercial there are some benefits from the same type of approach. I think the comments I made in the speech or the remarks were really the way we intend to approach this. I mean, we've told you what we want. We're gonna take the steps to make sure we get it.
There's a challenge, especially with Nat Cat, because of course there's lots of statistics, and people talk about return periods of forever. I think the challenge is to act with the necessary speed and intensity to address the issue, and that's what we're trying to do.
Peter.
Thank you very much. Peter Eliot from Kepler Cheuvreux. I had two on sustainability, please. Conny, you mentioned giving the customers the opportunity to repair instead of replace. I'm just wondering how that would work in practice, because there's obviously an economic consideration, and presumably, you know, you'd only do that if the two were sort of fairly close. I'm just, yeah, just wondering how that would work in practice. And then a bigger theme, possibly for Mario, I'm not sure. With COP27 ongoing, one of the rising themes is the loss and damage and, you know, introducing a mechanism whereby countries that have been affected by climate change can benefit. I'm just wondering whether that's an opportunity for the industry.
Appreciate Zurich doesn't want additional cat exposure as just discussed, but, you know, there might be an opportunity for the industry or for yourselves in getting involved in the process and how that would work. Interested there. Then finally, George, sorry to come back on the excess capital, but appreciate we're not gonna get down to 160% and appreciate, you know, you've got many other, you know, priorities as you've outlined. But, you know, if you are in a position where the capital you've got available is more than you can deploy, you know, just to be clear, is it a case of waiting for the end of the three years and making that decision? Or, I mean, yeah, just wondering how you make that decision as we go along, go through the plan.
Thank you.
You may not be the ideal customer for that first product, Peter. I mean, assuming, I guess we're trying to give the customer a choice. There may be trade-offs that the customer rates more highly. For the individual where replacement is really important to them, they may be prepared to tolerate a slightly higher cost of the product for the other benefits that they associate come with it. I think, I mean, this is something we offer. It's not something we require. I think it reflects the priorities that we place on this particular topic. Of course, by doing this, we're trying to attract people that have that particular interest.
If I can add to that, it's also quite meaningful for smaller things these days where there are supply chain issues. The customer can choose between, okay, do I wait, wanna wait two months for this to be arriving at my doorstep, or do I want to get this fixed quickly? I had an experience myself. I was going to one of these drive-in centers we have here in Switzerland. It was my car, I made a parking damage on two sides of the car. The guy came out and he was looking at it, and he was kind of polishing my car, and he was saying, "Well, this is a real damage you have on this side, but this is really not real damage.
Let me just see if I can get it away." Not only did it make me feel good because I hadn't damaged the car on two sides but also the actual effort of let me take that business from you. I think it gives a very positive impression to the customer, especially at times where supply chains are in upheaval and you can't get things fast. We're still early on this journey, but it resonates with customers and it makes a difference to be able to offer it.
At some point, you have to tell me which Strassenverkehrsamt you go to, 'cause that's not the one I had to go to.
Look, on COP27, I have a feeling that this is a broader discussion about inequality in this world. Definitely, I mean, I think Sierra showed that, you know, less than half of the natural catastrophes are insured and are then paid by somebody. The rest of it is simply damaging the population, the individuals, the families. Typically, this happens also in not very rich countries. There is a general issue about how much inequality we can tolerate. How can we have the richer countries supporting the poorer countries? Which then goes into even the societies, because everywhere we see very divided societies because there is too much inequality inside the societies.
I'm afraid that there isn't a private company solution for that. There must be a way to get agreement on these big social issues. Frankly, I don't see how a private company can take initiative on issues of that size and that big. Having said that, I mean, we have tried, for example, to invest significantly on flood resilience in areas and places where we have no business whatsoever, simply to help and protect the people there. And we have been doing this with the Red Cross, with international organization, and that work, I think, has saved lives and well-being of many, many people in those areas. It doesn't resolve the issue.
This is where probably the challenge for COP27 or COP28 is being or will be, how to establish a fairer system between the wealthy part of the world and the poor part of the world, and how to share this pain in a more equal way.
Peter.
Yeah. I think someone else asked me about the timeline, and I managed to not answer it earlier. The thing I don't want to do is to give some kind of calendar thing around this 'cause the world doesn't really work that way. Having said that, of course, we just set targets for the next three years, and the world will have to work that way. I mean, I think as you know from us, we have a strong preference to use the capital to grow the business. It's not entirely in our control. We've got what I think are pretty ambitious ROE targets, so of course that does create pressure to use it or to find alternative ways to deploy the capital.
I don't wanna give you the impression we get to the end of the three years and whatever is unused goes back. I think the history of the last several years is that we found good opportunities mainly, but not always. Where we have needed to deal with some of the capital topics in other ways, we have. The strong preference is if we can use it, we think it's better for shareholders if we can deploy it, grow earnings, grow dividends.
James. Next to you, Joe.
Thank you. It's James Shuck from Citi. Just on the Farmers margin, which has been below 7%, just interested to get your view about why you think that 7% is gonna be sustainable going forward. I'm thinking more that as the cost of servicing kind of falls as you digitalize, that the exchanges who have some solvency issues and performance issues of their own might want to renegotiate that number down. Just keen to get the outlook on that. Secondly, on the ROE target, which you have over 20%, just keen to understand how management remuneration will be aligned with that. Is there any tiering, meaning that if you go above 20%, then you get a certain amount, you go above 23%, you get a certain amount, et cetera. Thank you.
On the Farmers management companies, on the margin, why is it sustainable? We're coming back up to 7%. We've been a bit lower because of the restructuring triggered by the introduction of the MetLife P&C book. I don't think any of. Well, certainly from us, and maybe I'm talking from my own perspective, I don't see that as a solution to the challenge.
Yeah.
At the exchange.
Look, I regularly meet with the governors of the Exchanges, and this is not the way they see it because it is not the way it is. I mean, even if the margin were eliminated, that would not create surplus for them. The surplus for them comes if the business is at a better profitability level. We cannot run the business at a loss and then compensate it with a reduction in the margin. We simply have to run the business in profitable ways. This is not a you win, I lose or vice versa situation. We need to allow them to restore the surplus by restoring good profitability conditions for the business, and the margin is the margin. They don't really pay the margin themselves.
This is not something that's at the expense of the owners or the exchanges.
On the management remuneration, we don't really have the luxury to set the requirements ourselves. I'm looking at the chairman sitting over here. The board has an existing approach which doesn't tend to create leverage, 'cause that can introduce strange behaviors, I think, at times. It tends to be a pretty plain vanilla approach where we take the existing system and we drop in the higher ambition targets, and that gives you the same outcome as the lower target in the prior cycle.
Next, Vinit please, Joe.
Thanks. So Vinit from Mediobanca. Three questions, please. First is Conny, thanks for the brilliant presentation on the retail side and the loyalization. I'm just curious, I mean, slightly, if I'm allowed to be cynical, is that many insurance customers like it when their claims are paid and don't like it when their claims are paid. Well, when the claim is not paid, however nicely it is put to them. Is there any thought or discussions of looking at the loss ratio? You know you had the slide 36, I think, with the loyalty pyramid, and you had KPIs. But should not loss ratio be an important KPI? Because you can keep paying claims and everybody's happy, and that's not going to work. Just one, the first question.
Second question is for the commercial lines, for Sierra possibly. The slide 44, I think, has the credit and surety commentary about exposure cuts. Now, everywhere I read and every great insurer we talk to is surprised at how low insolvencies have been through this period, which otherwise could have been pretty bad. I'm just curious, I mean how do you think of the missed opportunities? Do you think the portfolio rebalancing is done? Do you think you're happy with the, you know, the size of the loss ratios or the large losses? Anything that you comment on the portfolio, please. Last question is on the margin outlook that, George, you helpfully commented that you expect peak margin, so that is rate excess of inflation mid-next year, which I understand would be earned through to 2024.
Is it in your plans that then afterwards, the underlying loss ratio, however IFRS 17 complicates it, starts to worsen a bit? I mean, and I appreciate this is a very unfair question because it's a very hard task given the economic situation, but just want to know what you're thinking at the moment. Thanks.
Should we start with the claims? If you're trying to do a customer loyalization strategy and you start with thinking about how on earth can I limit paying out claims is going to go the wrong way. Actually, eliminating the risk in that space has to start much earlier in the process with when in the underwriting process and when you bring customers on board, not later in the process. Let's optimize how we earn money, and then we squeeze our customers. I think that's a fairly clear answer to that question. Also, we have fairly low claims rates in the company. We actually have customers we never talk to because they don't have any claims, which we would like to change, not by having more claims with our customers, but by engaging more with them.
I think the average is still that an average customer has one motor claim in life. Which means that a number of customers never have it, and a few customers have frequent claims, right? But it's very difficult to build the relationship with the customers out of claims, at least in motor or even in homeowners. Other lines of business are much better. Even the sense of claims is different. That's the reason, for example, we like so much to grow in travel insurance, because there you don't have really the concept of a claim. You have the concept of a traveler who needs help, and you provide help to the traveler as part of the relationship in the policy. Claims are very important. They are the moment of proof, but they're very rare.
You need much more than just paying the claims to build the loyalty.
Credit. From a credit perspective, maybe a bit more nuanced than I explained when we went through the slides. Certain industries, we've seen some challenges with solvency in those areas we did address early. When we look at these portfolios, the two that I have up here are portfolios where we were fairly subscale. One of the things that we try to focus on is we wanna make sure that we have the right expertise, we have scale in our portfolio, and we can see a real opportunity to grow. When we look at our capacity in the space, we really wanna focus on surety. I mean, we're a leader in the surety space. We have a tremendous construction portfolio. That product supports the broader construction offering that we have.
It was weighing those trade-offs for us, and where do we have the greatest ability to be successful.
On the margin comment, maybe just a caveat 'cause I'm a bit concerned that Sierra will kick me under the table as I answer this question. This is gonna sound defensive. It's not really intended to. Remember, this is a scenario that we've used for planning. This is not an illustration of how we intend to act, no matter what the market is actually doing. We told before that, I mean, we see a moderating trend, especially on large corporate risk. If I look at the assumptions of the key, I'd say the key market for the time being, they assume that will start to gradually reduce.
There's no cliff function in here, but you will start to see it reduce through the loss cost trend through the remainder of the cycle. Having said that, just to go back to some of the comments I made in the main presentation, we don't believe that's true mid-market. Again, we have a scenario. We don't believe it's true retail. I mentioned the benefit of interest rates and the impact that that will have on combined ratio in future. I'm not really sure you'll find the effect when you come to look for it in the numbers.
Hadley.
Hi, thanks very much. Hadley Cohen, Deutsche Bank. A couple of questions, please. Firstly, George, how are you thinking about the debt leverage ratio of 26%? I mean, I think historically everyone's generally been comfortable with a number below 30% in the industry, but obviously that changes in an IFRS 17 world. I think one of your competitors recently has set a target of 19%-23% without including the benefit of the risk adjustment in the denominator. So just wondering how you're thinking about that and where that 26% sits in sort of your comfortable range, as it were. Then the second question for Sierra, please. On the commercial side.
Maybe I'm slightly overthinking this, but I mean, financing has been incredibly cheap over the last few years, and obviously that's very different now. I guess it's the mid-market companies that could come under a lot more pressure in that context. I'm just wondering how you're thinking about that in the context of your growth ambitions in that space. Thanks.
Debt leverage. Maybe again, a small caveat. I mean, we look at a wide range of different metrics. I think we typically focus most on the rating agency limits, which I guess you've quoted in the introduction to the comment. We also look at the broader more blunt force metrics like tangible equity, et cetera, which are probably more reputational than absolute constraints. I think if I look at us in terms of where we are from a cycle perspective, we would be. I mentioned earlier on the, I skipped through it fairly quickly, but when I got to the debt leverage comment, I made the comment that given the changes in IFRS 17, I expect to see a bit more equity. You remember that 70%, 20%, 10%.
70s gonna go up a bit, in particular the hybrid's gonna come down a wee bit. Senior's gonna move a bit, but not much. That would imply that we would probably target to deleverage slightly over the course of the next cycle.
Can I just clarify your question on financing? Is the concern that middle market companies won't be growing?
Well, just that they could come under a lot more pressure. Sorry. Just that they, their refinancing costs are gonna increase, so it just could put more pressure on their business, their ability to grow. You might see rising defaults in some of these companies and what have you. How you're thinking about your growth ambitions in that context for a potentially challenging environment for the mid-market space more broadly?
Yeah. I think from our perspective that it's still a huge market that we have a very small share of. So for us, there's still a huge opportunity to grow in the middle market space. If there's financial strain, you know, of course we'll have to consider that and factor that into our underwriting process. At this point in time, it doesn't change our view on the opportunity within the middle market space.
I think we'll take the last question from Thomas.
Yeah, thanks. Thomas Fossard from HSBC. Two questions from the mid-market strategy, because it's been such a big part of the initiatives of the strategic initiatives of the previous business plan that I'm a bit frustrated that actually you're not updating more where you stand currently and what needs to be, you know, done in terms of additional investments in building the platform. That would be the first question. Any market share that you could quote on the U.S. mid-market at the present time, where you want to go, and actually what needs to be done in order to become less sensitive to the U.S. commercial P&C cycle.
Also, the second question would be, can you talk about the mid-market strategy Europe versus U.S.? Thank you.
I'll try and you please chip in after. Why it takes long? Let me explain what it means to start growing the mid-market. It's not a software issue, it's not a system issue, it's not a competence issue. But you need to deploy the people on the ground. The mid-market business is in different location than the global corporate business is. What we had to do has been to deploy the people on the ground in different offices throughout U.S. and then U.K., which is probably the second big market, and then lately Australia, which is also an objective for us to grow in the mid-market.
Now, once you put the people in the market, then they have to reestablish, reopen, regrow the relationship with the local brokers, which is what Sierra was referring before to, that we're growing with the national, with the regional brokers, right? But then you have to acquire the customers, and then you eventually see all of this through your P&L and balance sheet. Now, in the last three years, we have been growing this pretty close to 30%. Now is that enough? I mean, we're never satisfied, but it's clearly an accelerated rate of growth. Could have we gone faster? Maybe, I don't know. It takes time to do that because of the nature of what that is. I mean, U.K. has been pretty much the same story.
I mean, we went from being very focused on the London Market business to start growing, opening relationship in the local markets across U.K. It takes a while. Of course, you know, day one that you come, you know, there isn't a market there just waiting for you to come and say, "Oh, you finally came. Here is my policy. Please underwrite it." This is what is behind it. In fairness also, we did some mistakes. I mean, in U.S. it took us a while to, get hold of the right management team. We started initially with one management team, and today we have a pretty different management team.
You know, nothing really goes pretty linearly, but we think we're making progress, and we think now we're ready to accelerate and show the achievement of it through this plan. You made a comment about not growing the exposure to U.S. commercial. I'm not sure we agree on that. We don't see anything bad on U.S. commercial, but it depends what you mean by that. I mean, we don't want to be exposed to peak risks in U.S., but it would be similar issue in U.K. or Canada or Australia or any other market. We very much like the U.S. commercial market. We're a big player there, and so we're not trying to shrink our U.S. commercial presence, but we're trying to be selective in what risks we want to hold on our portfolios from there.
Sierra. Yeah.
Sorry, Mario.
Yeah.
Can I just?
Yes.
Sorry, Thomas. Can I just add one other thing because I get older, but I can remember saying something at the 2019 Investor Day on mid-market. The comment I made there was because of the need to build, it contributes nothing, literally nothing to earnings over this entire cycle we're just ending rather. I think you hear more of it today because, of course, we've now got the opportunity to-
Yeah
Do something that's really quite different in mid-market for the next cycle. I think as Mario said, you zig and you zag a bit, but we're not really anywhere different from where we expected to be at this point.
Yeah.
I guess I would only add, and I think I'm only reinforcing the points that were already made that we're building a presence. And it's not just that we measure the revenue. I have confidence because we look at where we set out to have a larger footprint. Have we established that footprint? Have we been able to hire kind of strong underwriting talent in those markets? And we have. Have we been able to create efficiencies to be able to quote faster because you need to be more responsive in that area? Yes, we've been able to deliver on that. All the component parts that need to come together to help us build on this as a strength, we've been delivering along the way. Industry verticals, we talked about that last time.
We've developed industry verticals to help support our customer and to really focus on those industries that we wanna underwrite.
Thank you for the questions. Mario.
Yeah, I mean, I'm supposed to wrap it up but I don't know after just so many hours what else I can tell you. Look, guys, we think this is a sensible plan. We're confident that we'll be able to execute on it, and we are confident that we know what to do if things surprise us with some unexpected events, which surely will happen as we learn from the past years. As I said this morning, we have a very strong management team who knows what the business is and knows what to be active on. With something which will keep us busy over the next years.
In the meantime, we still have to deliver, and we don't forget this at all, the end of 2022, and show you that we are exceeding on all the targets of 2022. Then be sure that we will look at this plan with precisely the same ambition that we had on the two previous plans. I think this is all.
Yeah. There's drinks outside, so that's good news. Thank you.
Thank you very much for being here. We really appreciated that.