Good morning, everybody. Thank you for joining us in London today. Before I hand over to Mario, just a few points of order for the course of the day. First, as you've undoubtedly noted, we've tried as far as possible to make this paperless today. Therefore, there are very limited printed presentations for a few people who do not have electronic means. Please do not ask us to provide presentations. We're not going to do it today. That's also in line with our sustainability goals, and please be understanding for that. All presentations are available on the website, and there is internet access in the room. If you need to download them, you should be able to do that fine.
Second, as today's presentations will be webcast, could I ask you all to turn off your mobile phones so we don't get disruptions during the course of the day? Now just turning to the logistics for the day. There will be a coffee break after Mario and Kristof's presentations this morning at around 10:30. Coffee will be served across the hallway in the room where you probably were just before you came into here. If you need bathrooms, the bathrooms are down the corridor on the right-hand side. We will have two Q&A sessions, the first at the end of the morning, just before lunch, and the second at the end of the day. I would ask you to please save your questions for the dedicated Q&A sessions. Lunch will be served around 12:45 in the room across the hallway.
You will also have time to ask further questions of our management team who will be around over the lunchtime. We'll start back in here promptly at 2:00 o'clock for the afternoon sessions, before finishing up around 3:45 this afternoon. If you have any questions, obviously the IR team is available throughout the day, please feel free to reach out to us if anything's uncertain. With that, I'd like to pass over to Mario to start the day.
Thank you, Richard. Good morning. Welcome to the 2019 Zurich Insurance Investors Day, and thank you very much for being here with us today. This is a special day for us. When three years ago, George, Kristof, myself, stood in front of you, we planned for these results, but of course, we were not sure about that. This is a much better feeling, and it is a different presentation because today we can report not just on financial results and future financial targets, but also we can better explain what is our vision for the market, the industry, and ourselves, and how we planned to achieve the results and what we are planning for the future. There is a very different composition today, and let me spend a second on this. Compared with three years ago, where the three of us stood up, now you see a full management team.
You'll see the CI management team, the Commercial Insurance, which is Jim Shea and Sierra Signorelli. Sierra is the Chief Underwriting Officer for Commercial Insurance. Both Jim and Sierra have been driving over the last three years and a half the repositioning. They own the results of Commercial Insurance. Equally, you have presentation by Conny Kalcher. Conny recently joined us from one of the most important consumer goods company, where she spent a few years there. She's Chief Customer Officer. She's at the core of what we need to do to deliver our strategy. Giovanni Giuliani, Head of Strategy. He was behind the strategy definition of three years ago and has been a driving force in the execution of the strategy through the years.
You find in the room, and you have an access later on in the breaks to Kathleen Savio, Head of North America, and of course, owning a big piece of the commercial books. Alison Martin, Head of Europe, and before, Head of Risks. Dalynn Hoch, our Head of M&A and a former CFO of U.S. is here. You have a full team of people here present, and I'll talk later about they Make the Difference and what they have done in the past years and what they're doing today. Three years of targets and efforts. We're very pleased, and that's the message you will hear over and over through the day. We have delivered the targets. We have exceeded the targets.
We have delivered a simplification program, which is probably an industry benchmark, and we have adjusted the volatility of the business to who we are. We are an income stock. We need to generate cash every year. That's the promise we made. That's the promise that we are keeping. In order to do that, we needed to reduce the volatility of the business, and we executed on that. We feel very strong today in terms of the foundations of the business. We have a retail and we have a commercial business. Over the last three years, we have worked hard strengthening both. I'll comment on what we mean by strengthening. This is exactly the boost, the engine driving us forward. We are on a journey. We are on a multi-year journey, which doesn't finish in three years.
It didn't three years ago, it doesn't finish now with the next three years. The journey is to make this company the most successful insurance company in retail and commercial, knowing the challenges that we have ahead of us, knowing what the markets are doing, and I'll define the sense of division we have later on in a better way. The strategy we set three years ago, is the strategy which has been guiding us and is working very strongly. There is nothing more important than being customer focused. The whole revolution in retail, but also in commercial, is customer led. What matters is the customer satisfaction, the customer loyalty, and the further potential that exists to develop with customers. The targets that we announced today, they are very ambitious. They're much higher than the targets we are exceeding today.
We think we know perfectly at this time how to run the machine. We have tested the capacity. We know where the potential is. We know what levers to use to reach the targets, but the targets are a further stretch on what we have been achieving so far. We maintain our dividend policy as it was announced, as it was so far, with a 75% payout ratio and the current dividend in each year considered the floor. It's a ratchet function where the achieved dividend is the floor for the future. This dividend policy, of course, has been important over the last years in delivering what we think it's a quite rewarding shareholder return. We're close to 100 shareholder return over the last three years, in excess of the insurance stock index. You guys all know that very well.
More importantly, all the targets that we set are going to be met or exceeded by end of year. Frankly, we still think that we're going to exceed all these targets by year-end. George will talk about this later, but this is where frankly we feel extremely rewarded and proud for this achievement. Now, why has the stock moved so strongly, so fast? The EPS growth has been above any other peers. Each of these column here is a named company, and you can guess yourself who the companies are. These are the normal peers, and you see in the footnotes the list of them. Our earnings per share have grown above anyone else. More importantly, the net income coefficient of variation is the lowest among the peers. That matters a lot. As an income stock, this is what we are supposed to do.
We were not always known for this. This is probably the most important achievement, and we count on maintaining this over the next years. The core of what we did over the last years was a massive simplification program. Let me spend a few seconds on this because it is quite important that you really understand what we were doing. Yes, we had a cost target out there. What we had in mind was a business objective. We wanted to become more agile and simpler to serve the customers much better. The way we pursue this was not imposing top-down targets of cost reduction to the units. We did not go into massive layoffs. We were not doing bureaucracy in the organization. Instead, we tried to gather the organization of forces to get a simplified organization, a simplified IT, and simplified product and services.
How we did that? We did that in an unconventional way because you remember we started off with the strategy definition, which was done by a team of colleagues without any external support and without really us as top management guiding what they were doing. These 40 colleagues, with the support of some senior people, but just the support, they developed the strategy. They developed the strategy that they felt it was the most proper for us. Going into this simplification program, we thought about following exactly the same path. Let's have ourselves defining what to do. This wasn't a CEO-led program, it wasn't a COO-led program, it wasn't a CFO-led program. It is the organization itself that has reshaped it to become more simple and more agile. The way we did it was to create this group of people, which we called Make the Difference.
It all started when we requested. We made a pledge about who is willing to help us in doing this. Initially, the definition is you have a chance to make a difference in your organization. This is where the name is coming from. They volunteer to participate. We build this program in rolling waves, and everything has an important meaning on this. Rolling waves means that they're not professionals of simplifying, changing the organization. They do this for three, four months, and then they go back. The beauty of this is that now we have almost 1,000 people who have been involved, and these 1,000 people are the ones who have created all these changes here that you see. When we talk about delayering the organization, that wasn't a top-down order, you delayer.
It naturally came out from the work of the colleagues, what needed to be simplified in the organization. We changed authority approvals. We changed authorizations. We did that because ourselves, the colleagues, the Make the Difference people, drove us into what needs to be done to simplify the business. Make the Difference focused on three different priorities over time. Initially, it was simplification. Later on, it became sustainability, which of course is an important priority for them being Millennials. They helped us focusing ourselves towards what sustainability can mean and how important this should be. Even simple internal things like banning plastic or reducing paper, what Richard mentioned before, they were not even helpful. They were very decisive on that. Eliminating printers from the organization. If you want to eliminate paper, just take the printers away, and then people will adjust.
This is what they told us, and this is what we did. Eventually, which is what they're going to talk today, they moved to business. They moved to customer segments. They moved to product and services. Again, with the mindset that we own the company, we are young people, this is going to be our company. How better this company can be over time. Now, let me come back again on this, because all these achievements are extremely important. Delayered organization, reduced corporate center. We had a huge corporate center, which was calling for duties around the organization. It's 35% lighter today. What we have, the whole organization has benefited from it. The Make the Difference people came with a proposal to cut 1/3 of the steering committees. We cut 1/3 of steering committees through the organization.
Zurich was known to be a company always in committees, now there is 1/3 less of that. Simplified IT. Kristof committed to reduce the number of IT centers. He'll talk in a few minutes about that. We delivered on the reduction of the data centers. We delivered on the reduction of the networks that we use. Number of IT application cut by 20%. More importantly, we simplified the products. You cannot do these things if you don't go into the business at the roots of this complexity, you start simplifying the products. You'll hear later from Kristof, you'll hear later from Giovanni what this means in practical terms. This wasn't a gigantic simplification program, this is going to continue because the kids are continuing to give us advice and suggestions on how to do it.
Because once you get the traction, you keep on becoming more agile, more simple almost every day. The results, the financial results, you know them. One company achieved more than we did on that. We're quite pleased. This is what we targeted, and you will see by December that we will come ahead of our target of CHF 1.5 billion of cost reduction. It's a gigantic business simplification. It's not just cost reduction. This will continue over the next years and will give us further traction on business besides helping the P&L and beside helping the cash generation.
While we were simplifying the business and creating more opportunities for business, we were also investing in the business, the two most important things that we were doing to invest in business were work in specific markets and take opportunities in these markets to create a strong retail position in these markets. What you see there is the list of the acquisitions that we made. Some of them are tactical, some of them are very strategic. Travel is very strategic. We were not a player in the travel business. Now we're the second biggest global player in travel after a number of acquisitions we made. Australia, we took opportunity of market changes there, now we're number two in the life business. South America, Asia, again, we took opportunities available there. We are the third biggest South American player today across the continent.
We acquired a very interesting, promising opportunity for the future in Indonesia, where we are today the biggest Western company and a top five company in the Indonesian market. We look at opportunity to strengthen our business, most importantly, organically, we spend time understanding our customer base. Later on, you'll hear the Make the Difference people saying, "We don't want customers, we want fans." Where we started three years ago from was who are our customers? Insurance companies don't know the customers. Right? As strange as this statement is, insurance companies were not used to consider customers, their policies. We started really from ground level, who are the customers? Who are they? What they want from us, what needs they have, with whom other they work, who else is out there who could be a customer?
We established a system to understand and get feedback from the customers. Conny's going to talk later about this and how this is going to evolve. Some numbers are quite interesting. This year, we have more than a million people who have responded to us about how we serve them. This is a massive set of information that allows us to change. Again, later on this morning, you'll hear about what change is, how we responded to customer satisfaction and change ourselves. We are running what we call close the loop calls. It means that we call back the customers, and we do it, everyone does it. The CEO do it, CFOs do it. Everyone does it. The whole organization is calling back customers, listening, and taking actions. It's a massive traction.
As a result of it, what we see is that the retention grows, and we see that our capacity to develop the customers is much better, stronger, broader than it was before. Then we track market by market and country by country, what is the customer satisfaction. These all go into the people incentives and the people KPIs from two years ago until today. It became an important also way to measure the performances. Simplified organization, and we invested for the future by building businesses or by creating much better customer relationship. What's the vision we have? The way we run the business today is, of course, we look at the market, and we look at everything that's happening around the world. The market has a lot of inputs and a lot of constraints given to us from regulation to the customer revolution.
Our strategy is in the middle of it, because we filter the market trends and inputs with our strategy. Our strategy is the customer center strategy and then simplify and innovate for the customers. As much as we understand the customers today, that's their request. Get it simple, please. Insurance is too complicated. That sounds very simple to ask, but very difficult to deliver. How we confront the market today, we have a unique business model, and I'd like to spend a few minutes about this, and any question you have, happy to take them later. We are the only company I'm aware of that is running commercial and retail under one roof. One roof means one balance sheet, one business unit, one head of country. I'm not aware of anybody running these big businesses of retail and commercial under one roof as we do.
Why we do that? Because of this. Because we have a unique distribution model. The customer data for us, again, are the treasury of our business organization. We're not relying, as some others do, on huge captive organizations for distribution. We are relying very often on partnerships, and we made this a strength of us by developing our capabilities on the partnership distribution model. We are relying on brokers, we are relying on direct, and we are using the customer data across these two sectors. That means that for us, working with a commercial company, it's also an opportunity to develop an employee business with them in life and in property and casualty. The two things are quite different because all of you have individual needs, but all of you also are employee of a company. As employee of a company, you need some coverages.
As individual persons, you need something else. The data is extremely important, and we've been working a lot on data, and we continue improving the data. Again, you hear later in the day this importance of the data. The two markets though, although unified by the data, they're quite different. Retail is a market in transformation, is under a revolution. It's a distressed market, and it's a great opportunity to take advantage by being an innovator and possibly disrupt ourselves to take advantage of it. In retail, consider, and again, you'll hear this later, that there are fundamentally two buckets of customers in retail. One is the baby boomers, all the people, let's say above the Millennials, older than Millennials, and then the Millennials and the younger generations. What's the fundamental difference? It's not age, it's education. It's digital education. The baby boomers are not digitally educated.
We can be digital savvy. I can use technology, but I was not born with technology. Millennials are born with technology. This means two things. There's two fundamental consequences for us, and again, you'll hear that later by the colleagues. Consequence number one is they have different needs. We tested these needs over the last years. We launched Klinc in Spain in 2018. We launched Toggle in U.S. We launched a similar business in Argentina. We wanted to test, is this right that they have different needs? Yes, they have different needs. The second thing is this opens up to a global market because these different needs they have are very similar because they are educated in the same way by the digital tools. It's a very different set of needs and opportunities compared with the baby boomers, compared with the other generations.
The challenge in retail going forward is on the baby boomers, on the older generation, is how to achieve dominance in the customer needs. Today, we estimate that we cover 30% of their needs. No other insurance company does much better than us. The model with the baby boomers is that they buy insurance tactically and coincidentally, they don't choose insurance companies. As a consequence, you end up having a market share with the customers, which is typically around where we are or even lower. That's the opportunity with the baby boomers, with the existing customers. Then there are these new customers, the Millennials, the generation Z. How to grab that opportunity? Changing your business model and providing solution for their needs, which are very different. Retail is evolving transformation where there are lots of opportunities, but there is no sustainability of the existing business model.
Commercial, it's a very different world. We're proud of where we are in commercial. Different from what I heard over the last three years, we have no intention at all to scale down and exit commercial. We're the third biggest company in commercial globally. Our results are great. We are improving combined ratio. Jim is going to talk about this. The way Jim and Sierra transformed our portfolios over the last years make this business for us interesting, promising, sustainable. We will maintain this leadership position over time. It's a sustainable business, is not under revolution. You need to be extremely clever in the business you want to take in your portfolio. Today we are enjoying the results of choices made three years ago about the strategic vision of the market. We reduced casualty. We reduced long tail. We went into short tail business.
Now the next progression that Kathleen and Alison are implementing in U.S. and Europe is we're moving the business more and more towards mid-market. This is gradually transforming and improving the quality of the business, but it's a much more stable world than the world of retail. What's the final aim of this? The final aim of this is that we want to remain a leader here, and we want to become the priority choice in this space for our customer using the glue, which is the customer data, the brand and the capital for that purpose. If this is not clear, please ask me question and I'm happy, and as you hear, I'm extremely passionate about that. This is where really the journey is for us. This is a long-term journey that we started back in 2016. We're making progress.
We're gaining speed, we're gaining traction, and we will continue on this. Let me now talk for a second about how we run these two businesses, and where we think we have a competitive advantage. In commercial, everything we tried to do over the last three years has been differentiating ourselves. First of all, we wanted to differentiate ourselves on the profitability of the business. Again, these were named companies, and you can do that yourself. This is our improvements and this is what happened to them. We managed to have results pretty much ahead of the market and in some cases contrary to market results. The businesses, it can be run with profitable, good combined ratios. We reduced volatility. We did not speak anymore about large losses. Large losses is something that George and I never mention anymore. Why is that?
Because we brought the large losses volatility in a corridor which don't make them interesting to discuss with you anymore. We'll continue monitoring and working on that. The portfolios have been completely reshaped. One thing you heard me saying many times is, it's not the stock picking that matters, it's much more the strategical portfolio choices. We took underwriting as such. We said, in which sector do we want to be present? A year ago, we shrank credit. That was the decision that Sierra, Jim took, and we implemented it painfully, with the business, with the regions, with the customers, but we thought it was right to do it. Now people start understanding why that was right. We shrank casualty, not because we like or don't like, because we thought it was right to do it for us in 2016.
Again, today, we enjoy the benefits of that. You need to have a market vision to do these things. The profits, the benefits will continue to be extracted over the next years, and we will continue managing the portfolios with the strategic views of the portfolios. That is where we made a difference, and this is where we will continue exercising this difference. The other underwriting expense ratio in commercial has been reduced and is probably one of the lowest in the market. There is further potential to go here. On all these things, we're not satisfied. We're still hungry to go, and we will continue improving. It's important that you understand that there are years of development behind us, and we know precisely how to reach now the next targets that in a second, I'm going to get to. We maintain in commercial a unique service model.
The almost 70 points of TNPS score is one of the highest we have, and I believe it's one of the highest across the industry. That has always been a Zurich characteristic. Zurich has always been an extremely high-service company. We maintain that, and we're proud of it. We have dedicated customer account managers. We follow the customers one by one in commercial, especially the bigger customers. Jim is personally active with a number of customers. It's a very hands-on reactive model, which is what the customers like. This is the uniqueness of Zurich, and we'll continue with this. Underwriting. Underwriting has been an extremely important theme for all of us. With many of you, I discussed what was the problem with underwriting. Many of you thought that we had an issue with our underwriters. We never had an issue with our underwriters. We have thousands of underwriters.
They're brilliant people. They are extremely skilled. What we did was to reconsider, first of all, what was their empowerment and recognition. We moved them to be much more empowered than before, and we moved the recognition up. We changed their compensation system. We changed their incentive grids. We changed their KPIs. We worked on their professional careers, and we developed new professional careers for the underwriters. We started doing that in U.K., then we moved to U.S. Kathleen led a program on underwriters the beginning of this year. We moved to Switzerland. At the beginning of next year, we're going to move to Germany. With that, we will cover practically 80% of our underwriters. The rest of the underwriters are scattered because in U.K., in U.S., in Switzerland, we also run hubs for underwriting across the board. We stabilized the underwriting population.
The turnover dropped to below market and definitely below historical numbers. We're very pleased with that. Underwriting and claims are the backbone of this organization. We need them to be happy with us, we need them to be motivated, and we need them to be good as they've always been. Let me move now to retail. Before I start talking retail, let me summarize on commercial. A lot of changes happened. All these changes have been driven with a very clear strategic view of what we wanted from commercial. This is the business of which will give us a sustainable high single-digit return on capital over the next years. We're confident that the way we have formed the business, the business will deliver this over the next years. Be also mindful of the cycle of where we are in commercial. Commercial today is in a hardening cycle.
Be mindful of the fact that this hasn't been always the case. We've been on a softening cycle for a number of years, and now the cycle is turning around. This is the right time, and we are in the right set of positions to enjoy this by continuing developing what we have been doing, which is work on reducing volatility, work on improving the profitability, work on the strategic composition of portfolios, reduce the cost, and keep underwriting and claims as strong and motivated as they have been. Retail. Disruption, revolution, opportunities in retail. What have we done? As I said, customer insights has been one of the lighthouses that we followed over the last years. One thing that probably went under the radar is that in 2017, we acquired a company which was specializing itself in data analytics for customers.
It was a marketing data analytics company, which we acquired, we transformed it as captive. We eliminated all the external businesses, and we started using it internally. This is one of the engines, besides this customer focus, and this is what is ZCAM, which stands for Zurich Customer Management. We use it in our business units to provide us understanding of the needs and leads. What would the customer like to buy? The other thing that we have been working is we acquired more than 80 million customers over the last three years. This is a huge number. We developed partnerships. Partnerships, Giovanni will touch on this later, is the way we see the future of retail. Forget about captivity. Customers don't want to be captive anymore. You need to connect yourself through partners, through opportunities, or directly.
You need to reach out the customers with a unique customer experience, which is what Conny is working on and what she will deliver later on. We introduced new services. We introduced new services in mobility, in property, in travel, and in Wellcare. So far, retail has grown roughly 2% per annum in property and casualty and in life, but 2019 is accelerating, and we're confident that over the next years, this will give us further traction to accelerate. Farmers. Farmers is 50% of our retail capacity, and Farmers is part of all these efforts and changes that we've been making with one important exception. Farmers is a huge agency force. This is where exactly the disruption, the revolution happens. Knowing that, we started two years ago transforming the Farmers agents in agents capable of facing the changes and the disruption in the market.
This has included a number of different things, including management changes. There is a brand new management team working and leading the agents at Farmers. We changed the tools for the agents. We changed the incentives for the agents. We target, as a result of this, much higher numbers than 3% of growth per annum at Farmers. At the same time, Farmers has been investing in new opportunities. These new opportunities are Toggle, which is Millennials directly contacted with the platforms that they developed in-house, and it's very similar to Klinc that we have in Europe. They developed a strong relationship with Uber, which is very interesting but very different. It's not agency driven. They start investing themselves into partnerships. The retail franchise we have is evolving around customer insights and customer leads, but also about new investments in new ways of contacting the customers.
What does that mean for the targets, why I spend so much time talking about things that we have developed? This is exactly what give us then the confidence and the trust that now we can change the gear and go faster and achieve these higher targets than the one which are behind us for the next three years. What we want to do in the next three years, we want to establish ourselves as the preferred provider for our retail customers. That's an ambitious target. Today we're not. We cover 30% of their needs. We want to move and become the preferred insurer for our retail customers. In commercial, we want to take advantage of the market situation and our strength and keep building on that and remain one of the market leader, but improve our profits and improve the contribution to the profits.
In doing all this, as I mentioned before, we have a very strong priority into leading also on sustainability. We made a number of pledges, you see them on that side of the page. Again, what Make the Difference people told us strongly and loudly is, we care for these things. This is our world, we want this world to be sustainable. We try to decline this in things that mean something for us. We found three areas where we can lead the world on sustainability. One is work. Yesterday, we published a commitment on work sustainability, which is quite important for us. It's for our employees, it's also externally. We commit to help societies to face the issue about work sustainability in the future.
We need trust, we need confidence that work will remain an opportunity for all families and for all individuals, despite the concerns that people have on computers and digital and automation. On changing climate, we have been working already over the past years on flooding, but then we extended our commitment to be responsible underwriters and responsible investors. I think we're leading the way of the industry in making choices on the customers that we want to insure for that, or in leading discussion with the customers about what is your plan to make your business fully sustainable over time.
On connectivity, digital, cyber, we are working hard in making the trust back that this is the world where we can all thrive and live, and we're doing this with government, with organizations, but also with SMEs, with individuals, by giving them tools or coverages to maintain this trust in the world. That's an important element of how we will work over the next years. It will not go away. That's the way we see the daily work that we're doing. I'm doing bad on time, Richard. Sorry. One question I often heard was, what else can you guys deliver? We can deliver a lot more because we've been investing on ourselves a lot, and this is probably what you guys did not perceive, in details in the past, and this is why I wanted to spend time on this. This is where we see opportunities.
We can grow the business much more than we did before because now we know precisely what growth means and which growth that we like and which growth is not interesting for us. Productivity, we will remain cost driven. We will continue to simplify the organization. There is further opportunity to be achieved through cost reduction. Portfolio quality, we've done a lot. There is more to do. We're not at the end of the story. Three years ago, when George, Kristof, and I presented you the plan, we told you we will not be finished by 2019. We're not finished today that we are in 2019. Portfolio quality can still improve. Capital allocation. We have a continuous creation of capital. Capital allocation can help us improving return on equity by properly deploying the capital and better making use of capital.
These are the opportunities that we see in front of us. Trust me, we know the machine very well today. We know exactly what levers to use to get all these things into the P&L. Of course, we have drain. When you see later George's famous ROE walk, you also see the drain that we have. That all together will make us achieving the targets that now we're standing in front of you with. We talked today of a BOPAT ROE in excess of 14% and growing over time. George will show you a chart, an ROE walk, we now has 15% ROE target by 2022. Cumulative cash remittances in excess of CHF 11.5. In the past three years, we talk about CHF 9.5 . That's a significant step up in our capacity to generate cash and then to use this cash for shareholder remuneration.
We introduce a new target, which you kind of ask us for, which is earnings per share growth. The important word to underscore here is organic. We commit to organically grow earnings per share by at least 5% per year. We think this is a relevant commitment, again, being that organic. Of course, we remain committed to Z-ECM capital ratios and to run the business with AA as we do today. We also want to introduce two new KPIs. We talk KPIs not targets, because they are brand new for all of you and probably brand new for the industry. Net new customers, they matter to us. They matter to us for all the things I said before and for all the things that Giovanni and Conny will tell you soon. Retail brand consideration, again, that's very important.
We will track timely these two results, and we will report on you, and maybe later, they will become targets. Let me wrap it up before Richard takes off my microphone. You know the targets, you know the story. One thing I want to make clear, and I'll repeat this afternoon, we're not going to let any stone unturned in order to achieve this. Thank you.
All right. Thank you, Mario. Good morning, everybody. Good to see all of you. I'm excited to share with you how operations will contribute to what Mario described. Some of the accomplishments over the last three years, also how we'll build on that going forward. We have worked really hard to drive simplicity into everything that we do at operations. That's because I believe that simplicity is not just about efficiency. It's about how you deliver a consistent customer experience. It's also how you create trust that you can execute and deliver for your customers. Simplicity may be one of the most difficult things to do. It's like that in life, it's like that in business, it's no different in insurance. We are a complicated industry. We're heavily regulated. Regulation is increasing. It's sometimes diverging.
We all deal with old technology, somehow in that legacy, we need to bring in the new technology and address changing customer needs. That's why almost every insurance company talks about simplicity. Very few have actually done it. Now, at Zurich, we started this journey three years ago, and by and large, we are done with the back end. It's where we have focused. It's where you have seen the delivery of the CHF 600 million of savings in operations. I think what's more important is also giving us the confidence to actually now move from the back end to the front end and basically accomplish two things. One is drive a completely superior customer experience, and two is continue on that cost efficiency drive. With that, we're committing to taking out another point of the OUE ratio after the investments in growth and in capabilities.
These are some of the targets that we set three years ago. I won't dwell on it. I think the numbers here speak for themselves. I want to point out just one thing, which is that all numbers on this page are absolute numbers. When we talk about the savings, the CHF 600 million of savings in operations, that is our contribution to the CHF 1.5 billion overall. That is an absolute number. It basically means that we started with our cost base at the end of 2015. After the inflation, after the growth, after having continued to make the required investments, our cost base in operations today is CHF 600 million lower than it was at the end of 2015. That goes for every number on this page. I'll just give one more example.
If I look at the IT application, you see a reduction of 550 applications. The reality is that when we started this back at the end of 2015, we had close to 3,000 applications, and that application number grows organically. We add new propositions. We also do acquisitions. To just give the example of Latin America, QBE and EuroAmerica, just those two acquisitions came in more than 150 applications, so a lot of hard work to get that absolute reduction after absorbing all of that. Now, when I think about simplification or strategy, simplification comes at many different levels. If you think about the operation landscape, in the back you have infrastructure. That's our network, data centers, applications and tools sitting on top of that, and then ultimately processes and products. Cutting through all of it is that data layer that is so crucially important.
Our focus so far has been on the back end. It's where most of the investments have gone over the last few years. It's also where you've seen the savings. It doesn't mean that we haven't started on products and processes. Moving into the next phase now, that is where the focus will be. Before I go to the next phase, let me give you some examples of what we've accomplished over the last few years. This is an example of what we've done on the infrastructure side. As I said, two major components. There's the network, and there's also the data centers. On the network side, I think Mario mentioned it before already, we have more than 140 different suppliers.
Think about what that means when you need to put in place new technology like a next-generation firewall, the complexity of that implementation. We have brought that down to just one. We're working with one single global supplier. Makes it much easier for us to protect that, make it more secure, but also roll out new technology at scale. The hardest piece of work here has been the data center side. We started with 70, and here, similar as what we did with the applications. Through some of the acquisitions, if I go back to the QBE and EuroAmerica example, they didn't just come with 150 applications. They actually added 12 data centers as well that somehow we had to integrate. In spite of that, today we're down to 13.
We'll move the remaining three directly into the cloud over the next few months, which gets us to the target of 10. That again has done a couple of things. It has vastly reduced our attack surface from a cybersecurity perspective. It is a lot easier to protect 10 data centers rather than 70+. It's also reduced our cost when you look at the two combined. This has saved us more than CHF 100 million in run rate infrastructure expenses over the last few years. More importantly, it's also allowed us to move to new technology. Back in 2015, we had some limited cloud offering. We had a private cloud offering, very few applications running in it. Over the last few years, we've been on a journey of moving our application loads into the cloud.
Today, we run 34% of our application loads in either the public or private cloud. We run a hybrid cloud concept. More importantly, we've actually taken our entire technology stack. Taking that entire technology depth, moved it into the cloud, and with that, compressed it significantly because we now run on scalable standards infrastructure that again is much easier to manage. Some of the benefits of that are clear. I talked about security. It is much easier to protect because one other thing that we've done at the same time is that we've moved to an API-based architecture, which basically means that we have a standard way to get in and out of the environment, which makes it easier to work with ecosystems, distribution partners, et cetera, and much easier to manage that single point of entry than having many to many endpoint integrations.
It's also had a massive impact on stability. If I look at stability and we measure the outages, the Severity 1s and Severity 2s over time, if I look at the amount of severities that we've had, Sev 1s and Sev 2s this year, it is less than 1/3 when I compare it to the same periods in 2015. That's the simplification journey on the infrastructure side. Big driver of efficiency, big driver of expense savings as well. It gives us the ability to now move to new technology. It also gives us a much more stable and secure environment. Now moving up into that operational landscape to the next level of simplification, this time on the application side. I commented on that when I showed you the overall target slide.
We've taken out 550 applications, and that has really been across the entire spectrum, both from back end to front end. Just give you two examples. Our Russian business was sitting on a legacy system, came to the end of its life. Rather than replacing that, we moved them onto the first system, which is our homegrown application that we run for most of our standalone commercial countries. Now an example on the front end of simplification. We used to have five different applications that were facing the customer. Three risk engineering apps. We had a claims app where the customer could directly download claims data. We also had our MIA application. That's the multinational insurance application. They were all sitting on different technology stacks. They all had different operating models. We brought those onto one single My Zurich portal.
Customer has access in one place to the data they need. It obviously sits on one single technology stack. Cost of ownership is much lower. There's plenty of examples and a lot of hard work to get to that number. This has been one of the biggest drivers of the savings. CHF 230 million in savings just from the application simplification. One thing that I was worried about three years ago was also our ability to deliver new developments, new application development, new capabilities to our customers, because we had an IT organization that was actually largely outsourced and offshore that was using predominantly a waterfall model. Yeah. In order to be able to be much more agile and faster in delivery, we've done a couple of things. On the one hand, we've brought some of the critical capabilities in-house. Yeah.
Predictive analytics, big data is a good example of that. That used to be almost entirely outsourced. We've brought all of that back in-house, and we now run two centers, one in Barcelona, one in North America, that serve all of our regions, where we have a team that can do predictive analytics, but also host the infrastructure for big data analysis, data lake infrastructure, data visualization tools, et cetera. That's an example of insourcing. On the outsourcing model, we've become much more agile, and one of the things that we've been working on is to actually leverage crowdsourcing. We signed a strategic deal with Topcoder now two years ago. Topcoder is a crowdsourcing platform that hosts 1.5 million developers. Yeah. It's a global platform. It's now bought by Wipro.
The way we've been working with them is to access on smaller pieces of development where we need peak capacity or we need skills that are scarce to come by, product design, customer experience design, UX, you name it. We work with them in a very agile way, and over the last two years, we've done more than 60 projects with them. More than half of them have been in the innovation space. Simplification is not just about applications, it's also about tools, and I'm particularly proud of this example. Not because of the efficiencies this has driven, because frankly, taking out a single pricing tool doesn't have a big impact on our cost base. The importance of reducing the number of pricing tools, and here we went from 680 pricing tools to 300, is about the quality of the data. Yeah.
Typically, the first place where you capture the underwriting data is within the pricing tool. Yeah. Having that in one consistent space leads to better risk selection, it leads to better pricing. It also helps us with the accumulation management. To just give you an example, on the global marine line of business, we now have one single global pricing tool. We get to see the data in one single application. It also allows us to then run predictive analytics. It allows us to then run machine learning techniques, et cetera. A huge benefit on the underwriting side from simplifying the pricing tools. Moving through the stack of the operations landscape, we've covered infrastructure, tools, and applications. If I now move to the process side, this is an example of our Irish retail business. Yeah.
On the left-hand side, you see the good old green screen, very clunky, non-intuitive, took us a lot of time to actually train claims handlers. I could have brought a video. There's actually a cool video where we compare the green screen to the wide screen, which is the much more digital front end that we've now put in place. We have two employees doing the settlement of a claim next to each other. The one on the right is done so fast and gets so bored that the other one is still working, that he got up and left. Yeah. It just gives you a flavor of how much this has improved in terms of processing times. That is not the most important piece. The old system didn't have any interfaces neither. Neither with suppliers nor with customers.
This one is fully connected to our customers, and the customer experience has been vastly changed. The way it now works, when a customer has a motor claim, they can choose to either make a call, but they can also go to our web, or they can download a small app, and they can initiate the claims process themselves. It's all very intuitive. They can take pictures of the claim, upload those, and in some cases, we can actually straight through process those, offer indemnity, or send them to one of our preferred suppliers. With that, TNPS, which Mario talked about, it's how we measure the satisfaction of our customers, went up nine points on this transaction.
Settlement times, so time to pay a customer, went down from 10 to three days. We're targeting an improvement of one to two points in the loss ratio, because basically, we'll have about a 20% better steerage of people into preferred suppliers within our network. We'll also be able to use predictive analytics to do two things. One, look at which claims are good candidates for straight-through processing. Also look at where there are fraud patterns. Then brings me to the last example of simplification. This is now really the top of the stack, product simplification. The example here is one from our U.K. SME business. Mario talked about the 108 products that we had in the U.K. Now you may think that 108 products is a very customer-centric thing to do because it reflects all the different needs.
The reality when you see that product complexity there, typically it has grown historically. It's the result of acquisitions that are not fully integrated. It's because we made exceptions over time for a particular distribution channel. What it makes is actually a very slow and difficult environment. Hard to change things, hard to put in things like dynamic pricing when you have such a complex product landscape. What is different here with our approach, we did not tackle this from the back end, we didn't try to create the pan-European, pan-galactic platform that could host all products. We started with the customer needs up front, we basically mapped the customer needs to a minimum set of products that mapped those needs, that were vastly simplified, have much simpler wording. Yeah.
The result of that has been that, first of all, it's much easier for us now to articulate our appetite to new broker channels, new online channels. The processing times here as well. We now settle 80% of all service requests within an hour. TNPS went up by almost 30 points, the new business pipeline in U.K. has a historical high at GBP 100 million. A very good example of how simplicity on the product side doesn't just drive efficiency. Yes, I forgot to mention, at the back of this, we could sunset two applications, but that was not the main driver. The main driver was really how do we have a much simpler product set that is able to go to market much quicker, that we can adjust much quicker, and that leads to a much better customer experience.
That was some of the work that we did over the last few years. As we now move into the next phase of our strategy, we're shifting radically towards the front end. It doesn't mean that we're giving up on the back end. No, we will continue that journey. Particularly on the infrastructure side, you'll see us continuing to migrate to the cloud. You'll see us continue to migrate to that standardized API architecture. That's important because we do want to play in ecosystems. We do want to play in new distribution channels. Same on the application side. We'll continue to be vigilant about that application count. We'll continue to invest as well in tools and capabilities around data analytics, but the focus really will be on the front end. On the product and services side, that means that we want to develop more digital products.
That means products with a much more digital claims and underwriting experience. I'll give an example of that later, in support of the growth in retail and commercial. On the process side, we want to roll out intelligent automation at scale. One of the reasons that we're doing that is because we think there's still an efficiency gain to be had. We've made really good progress there over the last couple of years. We brought the OUE ratio down by 2.4 points. There is more to be had on the efficiency side. We think we can drive that down by a further point in the OUE ratio. Let me give you some examples, first on the product side and then on the process side with regards to intelligent automation.
This is an example on the product side of our Japanese retail business, where we started to write parametric earthquake insurance. If you think about a traditional earthquake product and the underwriting process and claims process that goes with it, we would assess the structure of a building, then based on historical data and our rating and pricing factors, quote a price, issue a policy. If an event would happen, the customer would start the claims process. We'd probably send an adjuster. At the end of all of that, we then pay out an indemnity, or we help the customer to get up and running. When you write a product like parametric earthquake insurance, the underwriting process is vastly different because basically, we developed a pricing model together with our global cat modeling team purely based on historical data and geography.
Purely on location of where a customer lives, we provide a coverage, which in this case is relatively small. It's JPY 30,000. The claims process then is fully automated as well. When an earthquake triggers of an intensity of 6 on some Japanese scale, I think it's the Shindo scale. If that happens, and the community in which the policyholder lives has issued an evacuation order, there's an automatic payment. The customer receives an SMS, and then they have two choices. We either wire the money into their accounts, or if they're somewhere abroad and they need cash, we can actually just send them a pin that they can go to an ATM with, withdraw the cash immediately. Vastly different customer experience. Underwriting process is basically gone because it is pre-underwritten. Claims process is fully automated as well.
We've signed up 175 customers so far through an affinity deal. 10% of those customers actually elected to have higher coverage. Yep. We're planning to roll another million customers into this program over the next two years. Let me move on to automation and give you two examples. The first one around intelligent automation is from our commercial property business, and this is from the European commercial property business. When you think about underwriting a large property program, it is typically a very labor-intensive process. You receive all location data, multiple structures, multiple locations, through the broker. If you're lucky, it's in different formats, but it's at least structured. If you're unlucky, there's some unstructured data in there as well. In the past, we would ship all of that off to India.
We had a BPO provider who would put it all in a somewhat consistent structure. An underwriting assistant would look at it, would complement the data with accurate geocoding, finally, the rating and pricing process could start. What we've developed here is a natural processing capability that basically ingests all those files, put them into a consistent structure, uses machine learning to actually put the right geocoding into missing address data. Massive improvement in the process, massive improvement in the adequacy of the data as well. Helps us, again, with risk selection pricing, helps us as well with the accumulation management. It's examples like that. This one will roll out across different geographies. We have other examples in other lines of business.
We think that through intelligent automation at scale in the underwriting expense base, we can take up to 50% out of that. My last example is a claims example. Here, this is an example of our med mal business or hospital liability business in our Commercial business in Switzerland. Here we developed a self-learning algorithm that is homegrown. We trained it on 10 years of med mal data. What it actually does is when a claims file comes in, it looks at the elements of the claim, it maps it against medical best practice. It also maps it against the coverage data in the file, and then comes up with a recommendation on both the indemnity, the final indemnity, and the initial case reserve for the claims adjuster.
Again, massive improvement in terms of efficiency in the claims handling process, but also a very rich and consistent set of data that helps us with fraud prevention, with looking for patterns. It's just one example. We're rolling similar things out across different lines of business. In aggregate, here as well, on our claims expense base, we think we can take up to 15% out over the next three years through similar efforts. Which brings me to my wrap-up slide. If you think about the strategy over the next three years, we're really trying to do two things. One is driving intelligent automation at scale across all of our core processes. Underwriting, claims, but also sales support. That will drive efficiency. At the same time, we want to enhance our propositions, make them much more digital, have a much better customer experience.
When I add the two up, and for those of you who have done the math, it is about CHF 400 million or CHF 500 million in efficiency if you take the expense base and take that 15% out of it. Some of that we will reinvest. After those reinvestments, we're still committing to a point in the OUE ratio. That brings me to the key messages. Look, we've worked really hard over the last couple of years. I think we've turned a corner on the back end. We have simplified our back-end operations. It's what has driven the savings. It also gives us the basis now going forward. We're radically shifting to the front end to really do two things. One is drive that superior customer experience. The second one is to continue on that efficiency journey.
With that, we commit to taking a point out of the OUE ratio. Now, I'm confident we can get this done. We have the team in place. We have the track record. If I look at what we've delivered over the last few years, we will deliver on these targets as well. Thank you for your attention. With that, I think we have a break. Richard, how long of a break do we get?
We'll now take a coffee break in the room across the way. Can I ask you to please be back in here punctually at 11:00 o'clock so we can continue on? Thank you. I'll pass it over to Conny to start the second part of the presentations.
Everyone. My name is Conny Kalcher. I joined Zurich on July 1st as Chief Customer Officer. To be very honest with you, I wasn't really that interested at first when I heard about this opportunity. I thought, insurance customer focus, I'm not sure. Actually, getting to know Zurich a bit more through the process, I got really, really inspired by the vision and the ambition for driving customer focus. I have spent most of my career with one of the world's leading brands driving customer focus, and that brand is LEGO. Customer focus is really key to our business at Zurich. It's something we're going to focus even more on with the establishment of the customer office. It was already in 2016, we defined our ambition to become customer-focused.
The change is already well underway through the NPS program, as you already heard. We actually get feedback from more than a million customers around the world. We understand what drives their loyalty, and we keep on acting on what they tell us. Customer loyalty is very key to our business, and it's also a key to driving profits going forward. We have a huge opportunity in the millennial segment. Today, you will hear more from the Zurich Millennials. It's a fantastic group of people, and they will tell you how the needs, behaviors, and lifestyles of Millennials are changing. They actually help us future-proof the company. Today, the main part of our business is more towards the Gen X and the baby boomers, and less so towards the Millennials. Actually, we only see that as a huge opportunity to grow as we move forward.
We're now ready to step up the pace and drive this transformation and focus more on customers. To measure our success, we are establishing two new customer KPIs. We will understand how well we are doing on this journey. With this ambition in mind, what are we actually going to do differently? Well, we're going to look less inside on ourselves and focus much more about being customer-led. That sounds pretty easy, doesn't it? It's something that's very easy to say, but quite difficult to do, especially if you are in an industry that's very standardized, policy-driven, complex, and highly technical. What we need to move to is becoming much more customer-led. That starts with focusing on the customer needs. Servicing up things to them that they find relevant in a personalized and seamless way. That's not enough, really, to become truly customer-led.
What else do we need to do? We need to change ourselves from being a product brand to an experience brand. What does that mean? Well, allow me to tell you a little LEGO story. LEGO used to be a product-focused brand. We were selling construction toys. However, our industry, the toy industry, was disrupted. The kids' lives were changing. They had computer games suddenly. They had access to the internet to play unlimited. They also had TV on demand, so always there, not appointment TV as what we were used to. Huge blockbuster movies were changing their worlds and their interests. LEGO actually had a choice to make. We could either adapt and stay relevant with these kids, or we could remain a little player in the toy business. Guess what? We actually did change, and we decided to become an experience company.
An experience company means that we no longer competed with other toy manufacturers. We now competed with children's time, which is a whole different ballgame. What we did is we started creating characters, stories, universes around the toy experience to create a much deeper engagement with the kids. LEGO, of course, is not the only experience brand in the world. There are other very strong ones. Disney, Nike, Apple, just to mention a few. What they focus on to be really experience brands is what you see on the slide up here. They focus on understanding their customers deeply, their needs, their behaviors, who they are. They create distinct and seamless experience for their customers so that they can move with them from online to offline and across channels, make it easy for their customers.
They also focus much less on pushing advertising out, information out. Instead, they create moments of dialogue. They really engage with their customers. Most importantly of all, they continuously improve the customer experience. What does that look like? Well, if you think of the Apple stores, for example, if you think of the LEGO store in Leicester Square here, those stores are bustling. They are alive. When you go in there, you get excited. You think, wow, this is an exciting brand. That when you look at that you think, retail crisis? What retail crisis? People are shopping. They're walking out of the stores with bags, but they're also lining up in front of the stores to get in. What can we learn from that?
Well, to take a step back, we're not going to be a Disney, we're not going to be a LEGO, but we're going to be something different. We're going to transform who we are and be much more focused on customers. Where does that start? It starts with looking at who we are, why we're here, and what's our value proposition to customers going forward. What are the promises we give to our stakeholders? Stakeholders are lots of different groups. It's our customers, it's our employees, it's our partners, including the agents, including the brokers, and it's the planet, our promise to the planet and to our shareholders. Through that, we study and get a deep understanding of customer behaviors. Through that, we become customer focused, and we start creating signature experiences for our customers. Giovanni will tell you some examples about what those signature experiences are.
What's important in this context is that they are unique to Zurich, not what everybody else is doing. We will focus much more on that going forward. If I were to tell you an example of a signature experience, I'm sure you can think of many yourself, it would be, for example, the Genius Bar in an Apple store. What Apple did was really, really brave. They took part of their shop floor plan, and you know about retail, that's actually selling space, and they turned it into engagement space instead. In that way, they gave their customers a reason to come into the stores, to be engaged with their products, to be engaged with the brand. All of these are actions we also need to take and find our ways of doing in a Zurich context because it drives loyalty.
Part of it is understanding the customers and listening to them. We have already done a lot of listening. We listen to more than a million customers a year. On top of that, we also call them back if they're detractors, if they weren't really happy with the service that we gave them or the product we sold to them. We call them back across the organization, across layers of leaders and non-leaders, and we get that one-to-one dialogue with our customers. It's hugely important. Through that, we learn to understand what the drivers of loyalty are. When we understand that, we can of course, be very targeted in how to improve it. Our efforts are paying off, as Mario already showed you. You can see how we're changing the pictures across the landscape here.
For example, in Latin America, we have grown the score with 5%. That growth of loyalty comes mainly out of Brazil, where they've done a lot to digitalize the process in order to make it easier for customers to be in contact with us. If you look at the North American score, you might think, "Hmm, how can that be a positive result, -1%?" It actually is a positive result. Because what they have done in America, and their NPS score is very high already, actually world-class, I would say. They have really focused on the pain points of their customers. They realized, and this is Kathleen's team, they realized that the claims process wasn't working. They needed to measure it across more touch points to really deeply understand what they could do better.
Instead of thinking about the score, because NPS is not about the score, it's the impact we can have with customers. They thought about how can we learn more so that we can improve more? They did. They measured more touch points that cost them a little bit on the score, but they did the right thing. They actually achieved a lot as well. EMEA is a little bit of a mixed picture. Some countries are really good, and some were suffering a little bit, for example, in the U.K., but suffering in the positive sense. They launched a new product that was highly successful, so their service team had a problem catching up. That whole problem has now been fixed. Again, the actual focusing on the customer drives the right decisions. It drove the right action. Look at Asia Pacific.
That's a fantastic growth. They of course, come from a lower base in their NPS score, but the growth really comes out of Japan. If you know Japanese service culture, you also know that they are very critical, and they are really expecting top service. We had some issues in Japan in our customer contact centers. The service was a bit uneven, but the team fixed that. They introduced more training and more coaching for the staff, and they even trained the back office staff so they could go on the phones as well at peak periods. It all paid off, as you can see. We have Farmers. They're last, which also has improved their NPS score, but is already also at a very, very high level. We don't build loyalty just for the sake of building loyalty.
We build loyalty because it makes economic sense. If you look at the numbers here, you can see promoters buy more. They actually buy 1.3 more insurance policies than detractors do. They are also more loyal. They stay with us longer, and if they are multi insurance policy holders, they stay two times as long. It's really meaningful not to focus up on the score, but focusing on driving loyalty. Of course, to no surprise to any of you, retaining customers is very cost efficient because you save the cost of attracting new. We keep on acting on this customer feedback. I'm actually very proud to stand here after only four months and having read pages and pages on activities taking around the world on this customer feedback.
I think there is already a very strong movement in the organization to focus on removing these pain points from customers and delighting them instead. Here are three examples. The pain points we saw, we have already talked a little bit about the situation in Japan, but just to mention the one in Spain, we learned from customers that they felt that the offer we had in auto insurance was very kind of restrictive. They didn't have enough choice. The team in Spain actually launched a modular offer where insurers could add their own choices so they could choose, do I want windscreen insurance or do I want excessive parking coverage, et cetera, depending on their needs. You can see in all of these cases, the score is going up. Not only the score is going up, we're satisfying more customers. We're delighting more customers.
That's what we need to do. The NPS program already works pretty hard for us, but it needs to work harder. We need to roll it out in more countries, listen to more customers, and also drive the response rate up. Because the more information we get, the more we can act. More importantly, what we're also going to do is add sentiment analysis, because it's not just a question about whether they would recommend us. It is especially about what they say, what their sentiment, what their comments are. You can mine that data so we add sentiment analysis and also social listening. It's about being where the customers are, not necessarily where we are. By listening there as well, we can take action in a much higher way.
As I said, Millennials are a very attractive segment for us. Even though they are more than 50% of the population, they're actually only today 20% of our business. We need to change that. What's interesting about Millennials is, and I'm sure you know if you have Millennials at home or around you, I have, so I know quite a lot about this, they have a radically different lifestyle. Let's look at the traditional lifestyle first. That's in the white up here. The traditional lifestyle for previous generations is very linear. You live at home, you get an education, then you get a job, you start a career, you settle down, you get a family, you buy a house, you buy a car.
That linear flow is super for insurance because we can offer a product at each life stage that is really, really relevant to these consumers. If we look at the millennial lifestyle, it's quite different from that. It's not linear. It's fluid. It goes back and forth. They settle down, get family and kids much later in life. They might have two careers. They might even move back home with you after the education. Which is not always a good thing, I know that. Also, we need to understand that way of life, and we need to be able to meet them where they are and offer them products and services that are relevant to them. What are we doing to address that challenge? Well, we are launching four strategic initiatives. The first one is to re-look at our customer value proposition, as I already said.
Why are we here? What are we delivering to our customers? What's our sense of purpose? Customers today, they search for bigger purposes in companies, and we think we are quite well-placed to deliver on that. We will look at our corporate brand framework and define the promises to our stakeholders, as I have already mentioned, dialing up tremendously in behavioral science and data analytics, because as you saw, that's really a key prerequisite to be successful in this space. Lastly, we need to innovate our customer experience. All of that to deepen our relationship with our existing customers and attract new customers. To measure our progress, we are introducing two new KPIs. Brand consideration as the first one, and net new customers as the second. Brand consideration really talks about the strength of the brand.
We know from research that customers only really can recall three to four brand names when they're looking for insurance or any other product. it's imperative for us to be in that consideration set. we are looking at to work with our local markets on how we can drive ourselves up into that set. If we look at where we are today, we are amongst the one to five, quite well represented there, but half of our markets are really outside that. We need to be more relevant to them and work on that. The next KPI is net new customers. This is, of course, all about securing that we don't lose our existing customers. That we treat them well. We're relevant to them, so they want to work with us and stay with us for longer.
That is combined with how good are we at attracting new customers, like for example, the Gen Z and the Millennials. They are key to our growth. That's why we have these two measurements. To summarize, we have already delivered on part of the transformation. We understand what drives customer loyalty, and we know how to service customers better. We want to be relevant to new generations and to serve them in a proper way because it gives us an opportunity to drive further growth. We have a clear plan for how we're going to get there, and we want to transform together with our customers. We want to measure success. I'm really looking forward to come back here next year, and the year after, and the year after, and share our progress. Thank you.
Good morning, everybody. My name is Giovanni Giuliani. I joined Zurich in 2016. I look after our strategy as well as our innovation and business development agenda. I'm very excited today to speak with you about retail, which is such an important contributor to our group performance and also complements very well our commercial business strengths. You heard from Conny how we're continuous focused on customer experience. You will now see from the business retail point of view how it looks like today and how it could look like in the future. Let me start with some key messages that I want to leave with you. First of all, we like retail.
Retail is large, and it's growing, and we operate in retail with a very solid franchise, which we have also further strengthened in the last few years. Not only we like retail, we also like the way that retail is evolving. Mario mentioned this morning about the disruption that is happening. This creates an opportunity for us. It's driven by technology and by customer shifts. The opportunity for us is big, because we have an open architecture and distribution, and we are also starting to benefiting a lot from our recent simplification efforts. In the past years, not only we worked on simplifying the organization, not only we worked on strengthening commercial, we also made significant investment and tested solution in retail, which we are now ready to roll out further in the group, which are creating the opportunity to go much deeper in the relationship with our customers.
I will also share with you our plans to grow in customer segments which are largely unserved in the industry, SME and Millennials. Last but not least, a transformation of this size and with such an important focus on the customer, requires speed and requires scale. I will show you how our program, which is employee-led, Make the Difference, is unlocking the energy of the entire group across organization. Let me start with the first message, which is, we like retail. Why we like retail? Retail is large. It's 70%-80% of the entire industry premiums. It's not only large, but it's also growing. It's forecasted to grow by 5% in future. This is probably the largest contribution to the industry growth. We define retail as individuals and SME. As such, it also offer a variety of risk, which stabilize our earnings.
Being also short-term in nature, it's very profitable. Compared to Commercial, which is our strength in the Group, it's also less capital intensive, and therefore, it produce very attractive return on equities. Not only we like it as it is, we also like the evolution that we see. Let me explain you how we see the evolution. What, in the past, was almost a one-model-fits-all scenario, in which basically we were pushing, the entire industry was doing this. We were pushing product through one or two channels, specifically agents and direct, in most of the cases. We were outsourcing the customer relationship almost completely to these channels. We are moving now in a situation where the customer have much more power. The power to compare, the power to choose.
They are also much more at ease to buy from a variety of distribution alternatives, like they do for any other product besides insurance already. To compete in this scenario, you need two strengths, two characteristics. First, you need to be at ease with the multiple distribution channels. You need to be much more open. You need to be where the customer is. Second, you need to change the approach on customer focus, customer simplicity. This is largely a buzzword in the industry, but what is meant so far, it was meant like a captive relationship with customers. This is not anymore the case. You cannot keep the customer captive. What you need to do, you need to be close to the customer. You need to have a customer intimacy, which is based on superior understanding of the customer, and also the ability to meet their needs.
This is even more true if you think about the next generations. You see here on the map how relevant they are, how sizable they are, and Conny mentioned how distinctive they are in their needs. It's like a tsunami, honestly. It's coming very soon and very strongly. Against this backdrop, how are we performing? What is our franchise today? I have only one word to summarize it. It's very solid. First of all, it's large. We have more than CHF 20 billion of premiums in P&C. We have more than CHF 3 billion of APE in life. We have another CHF 20 billion in Farmers. This is a massive operation that we have in retail. It's not only large, it's also profitable. Every single business contributes to our profits in an almost equal part. Not only profitable, it's also growing. It's a very solid starting point.
The profit that we generate from retail, it's also very healthy. Think about our life business, for example. We were among the first to focus on capital-efficient product already years ago. At the end of last year already, 80% of our new business mix, it's made up of protection and unit link, which are very capital-efficient products. If you think about P&C, it's a similar picture that you see. Our combined ratio, which was already very good, has further improved over the last years to below the 94% threshold. If you think about the efficiency and the result of the simplification that Kristof mentioned before, we have further benefited also from that angle. It's a very healthy business that we have. We also enjoy the fact that we have six market, which together represent 70%-80% of our business.
That's very good, also from a managerial point of view. Differently from some of our peers, these six markets are not concentrated in one continent only. We actually have a much more geographically diversified franchise, which is very good for the stability of earnings. Moreover, we have further invested in them. We have acquired, through bolt-on acquisition, specific capabilities, and we have also solidified specific market situation. Specifically in travel, we acquired Cover-More, and also a few other companies after. We are now number two in travel. We also acquired, in life, the business of OnePath, making us the number two in the life business in Australia. In Latin America, it is a very fast-growing market, we are now number three altogether, thanks also to the acquisition of QBE and EuroAmerica.
In Indonesia, we have acquired Adira, again, giving us a very prominent position in this very large and growing market. What we also like a lot, as I mentioned before, it's our heterogeneity in the distribution. We don't depend on one single channel. We don't have a massive legacy situation to defend or to worry about. We are actually very well diversified. We are strong in agents, of course, in Farmers in America, but not only. We have similar number of agents also across the business in different parts of our geographies. We are also strong in direct, where we serve more than 3 million customers, and we very often have a leading position in the market. We are among the number two or three in different markets. For example, in Japan, we are in this situation. We are also in this situation in Argentina and also in Germany.
In the other market, we nevertheless grew more than the market. Direct is also very strong. We also have a very strong element in bancassurance. You know, because you know the biggest of our partners, namely Santander, Sabadell, Deutsche Bank, now ANZ, we actually enjoy more than 70 of this relationship, which give us access to almost 100 million of customers. Last but not least, particularly in the scenario that I mentioned you before, affinity and partnership. These are becoming very strong. We already benefit from their heritage with some of our traditional large partners, like in Brazil, we have Varejo, which was historically very successful for us. We are also growing and growing in this channel continuously. I will show you some example in a minute. This is not enough.
Having a solid franchise that is large, profitable, growing, well-diversified also from a point of view of distribution, is not enough. What we have done in the last years, besides, as I mentioned before, taking care of the operations and the commercial, we have also invested them. Let's start from the center of the slide. There are a few examples that I wanted to mention to you. First of all is our continuous effort on driving customer satisfaction and resolving their pain points. Conny alluded to this already before. The second is our ability to extract and to understand customer insights. We have created a specific unit in the group that does exactly this. It's called Zurich Customer Active Management. Mario mentioned it before. I will illustrate it to you in a second. The third example is our new propositions.
We have tested and launched several propositions in four domains, which are very important for us, in mobility, in Wellcare, in property, and in travel. I will show you how these propositions help us to retain and advance more customers. The last two examples that you see on the slides are related to enhanced distribution, both in terms of depth and in terms of breadth. Depth that we achieve to enhanced technology, which we provide to our distributors, specifically in the agents' part. Breadth is the continuous expansion of our network of affinity and partners. Why this slide is important? For several reasons. First reason, all that you see here is based on proprietary knowhow. We have developed this internally. It represents our competitive advantage. Second reason, all these initiatives are already active in the group. We have tested them and refined them.
You don't see here what didn't work. You only see here what worked. You will see how we are ready to deploy this at scale in the group. Third, these initiatives, each of them, in isolation or in conjunction, impact directly the four driver of our business performance. They allow us to retain more customer, which means that the customers stay more time with us, longer, and you see the impact, you see how fast it's to achieve impact through this lever. They also tend to buy more. You see here, just by selling one more product every 30 customer, produce a very significant result.
Not only that, when you have customer that stay longer, that you know better, and they are also more invested into the company by owning more product, they tend to have a better risk profile, which is also, of course, very helpful for our performance. By expanding our distribution, we are getting to more of them. Let me go through some of these examples. The first one is the program that we already mentioned. I'm going quicker here, but I just wanted to highlight, we already had a program for NPS in place, several stable. What we did in the last two years, we brought it to the next level. We expanded the number of countries that participate, 25 up to now. We expanded the number of touch points that we monitor. Many more touch points that we used before, which was mainly focused on claims in the past.
We also consistently apply the same methodology. Everybody in the group now use the same methodology, same provider. If any of us wants to see what is the result of the latest customer satisfaction or even the latest complaint of customers, we all have it on our mobile. I can access from here every single market, every single sub-segment, and not only myself, everybody of my ExCo colleagues can do the same. When you do this, you understand you can start to act on findings. The example that I have here is the same that Conny mentioned, I'm going to go quick on that. It was based on a specific channel that we had in Spain, a car distribution channel, car dealers. They were bundling, as many are doing in the industry, they were bundling the possibility to buy a new car with a new policy.
This bundle was considered as very limiting for the customer. What did happen is that after one or two renewal, some of our customers were churning. We learned this, we changed the proposition. We introduced the modularity and the flexibility that Conny mentioned. Not only that, we also inserted this channel into our renewal program that we already did for the other channel, and now it's fully integrated and is end-to-end. Now you can see the impact on the customer satisfaction. Similarly, we achieved very good retention impact in Italy. We achieved 1.3x in product density. In Germany, we also reduced significantly the cost of acquisition because it's intuitive. If you don't need to reacquire a customer, it costs you much less to retain it. This is the first example. Let me go to the second example, which is the ability to generate insight.
This was very important for us while we were advancing on the NPS program. In order to generate customer intimacy, you need to understand the customer in a superior way. We were not able to do that. We went out, we looked for the capabilities. We found the best capabilities. We acquired them. Once we acquired them, we voted in the group. We rebranded them at Zurich Customer Active Management. We gave them a mission. The mission that they are executing against is very clear. It's three things. The first one is give us the 360-degree of the customer review. This is something that in the industry is very often mentioned like the Holy Grail. If only we could know everything about the customer.
The issue is that very often this data exist, but they are dispersed in multiplicity of IT silos, databases, and things like that. With this technology, we actually summarize them in one place. We now know the customer has a car policy, good. We also know that the customer lives in a certain part of a city, which other products they have, which channel they use, what is the profitability, what has been the claims history, and so on and so forth, all in one go. That is only the first. The second thing that this technology does, they look for patterns. They look for patterns into the business, in the results, in the data. For example, they found out that the vast majority of customers that drive a sport utility vehicle also happen to buy life insurance for children to protect their children.
Once you find it sounds very intuitive and it's obvious, but it was not before we found it. Now that we know it, we can actually pass this information to assess distribution, and that is the third thing that this company does. It seamlessly integrates with any of our distributors. The agents, for example, receive a pop-up directly on their CRM system, whatever they use and whatever tool they use, and this information is passed very timely to them. The system doesn't stop there. The system also look in the portfolio and see whether the recommendation was successful or not based on the actual sales, and therefore, the artificial intelligence engine continues to learn.
The results that we have achieved are quite impressive, both in terms of increase in share of wallet or in product density, but also in terms of how many times customers now buy from us a product in the P&C side and in the life side. This is not a surprise that many other countries are already embarking on this journey. Why this is important? It's important because, first of all, we have made the investment, so now we can scale up at a marginal cost. It's also fast because the algorithm has already been tuned. It needs to be fine-tuned in the next countries, but not starting from scratch like the first time.
Second, it is important because allows us to do what Mario mentioned this morning, which is to try to transform our current customer from what they are today, which very often they are transactional buyers, because they do not have their entire portfolio with one carrier. They do not have the entire product with us. They actually spread across different carriers because for them, they are all the same. They bought over time, during their life, just because it happened that at that specific moment, someone proposed them one product, or they were looking for one specific solution. Our research indicates that on average households, our households, clients have six products. With us, they have only 30%. There is a huge opportunity here if we know exactly what they need.
The second reason why this is important is because the intuitive relationship between the tenure and the number of products that you have is now proven, we have documented it in our business, and it's more than proportional. When you achieve the situation where they buy not only P&C, but also life, it's even exponential. We are going to benefit from this largely, and we expect that this will be a big driver of our growth going forward. Let me tell you that when you propose a new product to customer, you are much more successful if you propose something that is more modern than the traditional product that everybody else can offer. The industry, like Conny said, is very standardized, and we tend to all offer similar products. That's why we also started to invest in new propositions.
We did it in four domains, which are core for us, because after all, what we do is to protect our customer when they use their automotive or when they move, when they are at home or in their office, when they travel, and we also look about their lifestyle and their wellness. In these four domains, we will remain active. We just will do it in a different way, which is much more modern, using technology, using digitalization, providing convenience, but also putting together an ecosystem of insurance solution, but also services. This will create different relationships with the customer and ultimately also improve their risk profile. Let me bring these four domains alive for you by showing you a video which has synthesized some of the proposition that we already have launched in the market on each of them. Please.
We are living a transformation. The world is changing rapidly, and customer expectations are shifting fundamentally. By harnessing technology, we have started to evolve our customer offers from simple protection into connected solutions that combine prevention and risk mitigation services. Mobility. Worldwide, the shared mobility market is growing, while customers request integrated bundled services and offers that give them value for safer driving. We evolve traditional motor insurance into mobility solutions that provide smart protection and assistance to drivers and commuters. Your driving style is automatically detected and rated based on your behavior. Manage all your family cars and configure your covers based on your lifestyle by switching on and off, depending on what and when you need it. Smart home and smart buildings. Smart home related services are expected to grow rapidly. That is why our smart home is built on three main pillars.
Home insurance, on-demand additional services, and smart home services. Travel. The global travel market is growing at a significant pace. As a result, the travel insurance market is growing strongly. We evolve basic travel insurance into solutions that make our customers' journeys safer and more convenient. Wellcare. Healthcare costs continue to rise persistently at a faster rate than inflation. This is driven mainly by an aging population, a rise in lifestyle-related chronic diseases, and a rise in cases of depression and mental disorders. We increasingly support our customers in living a healthier life and making it easier for them to manage chronic conditions. We want to be part of this journey by providing support and extra motivation within three core wellness pillars: your body, your mind, and your community.
The key to our long-term success will be better customer insight, engaging our customers more frequently and in more meaningful ways. Our customers are our key. Their experience is our future.
We said so far, happier customer that stay longer. Better understanding of customer needs, which allows us to propose and to serve their next need. How? Through improved propositions. What do we need now? We need more customers. We also worked on the distribution, both in depth and in breadth. Let me go through this. Depth is made up with our agents using an enhanced technology. The situation that we were facing here is that all our agents have already CRM solutions. They can buy from the market, multiple vendors available. There is only one issue. It's the same proposition, the same vendors that sell to all of our competitors. There is no real competitive advantage here. What we did here, we had to go beyond it.
We asked our agents, "Why don't you develop yourself the tool that you need?" Why don't we do this in a way that is distinctive, is different? We even went to Cupertino to do this. We involved many of our agents, and we designed the solution directly with them. The tool that they came up with is a tool that is extremely easy to use, but apparently for them, it's very effective. There is one reason why this is the case. When you approach a customer, it reminds you of five things that you should know about this customer. When a customer calls you, automatically the phone is connected with the iPad or the tablet, and immediately you see the customer profile on that. You can investigate everything about the customer, you know exactly how many products they have, the claims history, profitability, and so on.
Exactly like I mentioned before in ZCAM, the two are also connected with each other. You can visit the customer. You don't need to have the customer come to your office. Forget about the black screen that Kristof mentioned to you or showed you before. This is a completely different experience. You can look at the tool together with the customer, also the intimacy, it's much better. If you want a quotation, you press a button, you get a quotation. If you want a contract, it's also getting you the contract directly. The customer can sign directly with a pen, he gets the contract in the email immediately. Already from this, you understand the potential of this tool. It saves a lot of time. It's also much more effective in the sales pitch.
It's a very good tool that we have developed first in one country to test it, now even our mother company is adopting it at scale and more will do in the future. Last but not least, is the extension of our reach in distribution. This is the core to us, as Mario mentioned this morning. We are convinced that we need to open up ourselves much more. We need to be where the customer is when the need for insurance arise. Today, the vast majority of insurance, they are all fighting and competing here, which is for a very limited share of customer time, which is when they want to buy insurance with an agent or through direct. The customer don't spend the entire day or life to think about insurance. They actually have something more to do. They go to work. They go to bank.
They interact with utilities. They use the telephone. They travel. In each of these industries, there are services that are provided to them and needs that arise that would benefit from an insurance coverage. Problem is, insurers are not there. We are never there when it's needed. We know, on the other hand, how important it is to have this relationship with these industries. We know it because we did it in bank. It's called bank insurance. It's a very successful channel. It's growing very attractively. We think that the same is going to happen with all other industries. There will be companies, champions in each of these industries that are already looking for the best partner in insurance out there. We want to be that partner, and we think we can be a very good partner for several reasons.
First of all, we are present in many geographies. In retail, I mean, commercial is even more because we are present everywhere. In retail, in all the four continents, wherever it matters, we are there. For champions in other industries, particularly those that are not only focused on one country, this is very attractive as a potential partner. Second, we offer, we cover all the possible type of risk, and you also saw before, we are very open to also innovate in new coverages and new propositions. The brand, the Swiss brand, speaks by itself, is very solid. It brings value added to their customers. We have a very flexible distribution channel, so we are not afraid of any legacy conflict with one particular dependency. We can embark in this relationship much more openly and with good intention than others can do.
We now also know how to understand the customer much better. We have a strong data analytics franchise, and we can deploy this, and we can also partner with them to leverage on them. Our track record is very strong. The heritage of Zurich has always been to be very close to big corporations. From our commercial focus, we inherited this. We understand the B2B. We understand it very well. We know how the corporation thinks and work. 26% of our business in P&C already comes from this channel, 50% even in life. It's interesting to know that in the last 12 months only, we have been able to secure more and more of this partnership. This partnership, each of them in one go, give us access to a large amount of potential customers. I'll give you one example.
Not to mention all these banks, to mention utilities. We did one partnership recently with Eni in Italy. It's an energy and gas utility provider. In one go, we can reach 9 million customers. Imagine how many agents or how many other type of channels we would need to deploy to reach such a capillarity. What do we offer in this case? Well, we started from the simplest idea, which is we are going to ensure the electrical appliances that they bring to your house. That's an asset, and you need to protect it. We went on, and we said, "What about the income protection of being able to pay the bills in the future?" That's also important, and you need to cover it.
We went on and on, and we eventually reached the full spectrum of risk. Third-party liabilities in your condominium, all the pipes and glass and the building is covered, and so on and so forth. These are very promising distribution opportunities that we have in front of us. To summarize this first part, we have a large customer base. We are going to go deeper in the relationship with them. We are going to make them stay longer with us, buy more, because we better understand their needs, and also increase their profitability and through new proposition and reach more of them through enhanced distribution. That is not enough because, as I mentioned to you before, we also have plans to grow in SME and in Millennials. Let's see how. We have invested also in these areas, and we know how to do it.
First of all, SME. SME is a large and very attractive market. In many of the markets where we operate, there is a strong SME market potential, growing and profitable. I think we can go beyond this. Why we are confident in this is because we have laid out a set of initiatives which we are now going to deploy at scale. First of all is the simplification. Kristof mentioned the simplification that we did in many parts of our business, and Mario as well. It matters also in SME. The example in U.K. that was mentioned before, from 108 different proposition, which, as you can imagine, generates some confusion in the distributors, in the end customers. There is some overlap. Not to mention the complexity of running them and making sure that there are no errors when we quote and things like that.
We consolidated to eight. Eight very well-structured proposition. It's now much, much easier for us to quote and to serve our distributors. It's much easier for the customer to be served. 20 point of increase in satisfaction. That's impressive, and we enjoy now the wider access to distribution and the pipeline that we have ahead. This is now moving further from the U.K. to other countries where it matters. Similarly to what I showed you before in individuals, we are also working to enhance our distribution for SME. Couple of examples here. The first one is a new tool that we are providing to agents. What is it? Is it a mapping of all the SME that are present in your area of responsibility.
For each of these SME, you will know how many of them you already serve because they are your clients, but also how many you don't serve. For the latter, you will know which industry they belong to, what is most likely the need that they have, and therefore, you can prepare much better for going and meeting them and be much more effective in the meetings. Another example is for brokers. We know that when requests for quotation come to us from brokers, they come from a variety of different platforms. We have to respond to all these platforms, of course, individually. It requires a lot of manual work, it's a very lengthy process and also exposes us to possible errors or inconsistencies. We changed all this. We simplified dramatically. We went to one platform. One platform on our side.
Very easy to connect with this platform from the distributor side. We have now the entire catalog of product only in one place. Therefore, consistency, speed of execution, faster quotes, et al., improved dramatically. The third example that I want to give you in distribution is how to serve or how to reach the SME that prefer to shop online, or to at least research online and then maybe shop online or shop in physical presence. These SME are typically smaller in size, and they have also a younger leadership. What we do to reach them, we are working with CoverWallet. We have done an exclusive partnership with CoverWallet in Europe. They are very strong in digital marketing, as you can see from this impressive conversion rate from leads to buy and from quotes to buy.
Therefore, it's not a surprise that we have started in one country, we have already rolled out in a second country, and more country will adopt it going forward. SME is an opportunity that we are very committed to capture through these innovative solutions. The next one is Millennials. Millennials, as I mentioned before, and Conny mentioned as well, it's very large, and it's very different. For Millennials, all that I said before, of course, can apply, but up to a certain extent. We need something that is even more specific. That's why we developed solution that are specifically designed for them, and we are continuously learning here. We launch, we learn, we launch, we learn, and it's a continuous process. The first one that we launch is Klinc, is a gadget insurance, as it's called, or smartphone insurance.
You can take your PC, your mobile, your electrical bike, and from the mobile, you can insure it with one click. You can also de-insure it if you want. There is a switch on, switch off features. This is very convenient, and they love it. The second one is Toggle. Toggle was launched by Farmers. It's already active in 23 countries, more than 16 States, more than 16,000 policies in force already. It's targeting specifically renters. HomeFlix. It's a similar proposition developed by Zurich. If you like Netflix, you will love HomeFlix. It's the same concept. It's a subscription-based insurance.
Not only you have the convenience of a digital home insurance in your iPhone or your smartphone, but you also have the possibility to have 24/7 home assistance always available, you also have a network of provider that has been selected for you, like plumbers, electricians, and so on, all embedded in the same proposition. The last one is doppo. doppo is a very innovative way to completely invert the relationship between the insurer and the client. We are not going to ask you many questions and then provide you with the pricing that we think it's better, but actually, we do the opposite. We ask you how much value of your car you want to insure, we are going to tell you exactly how it's going to be done, and we will commit to that.
If you change ideas, you want more value insured in the future, of course, you can adjust dynamically whenever you want. With this, we are acquiring more and more expertise, very promising, but it's only the tip of the iceberg. You should expect that this will evolve over time as we continue to invest in this segment, as we continue to progress on our understanding. Let me summarize my key messages today for you. First of all, we like retail, not only because it's attractive, but also because we have a very solid franchise that is growing, profitable, that we have further solidified, and is very well prepared for the next evolution that we see in retail, which is much more open architecture and based on customer intimacy. We have invested in retail in the last years.
We know what works, why it works, and we are ready to deploy this at scale. We are ready, and we have very clear plans to target SME and Millennials. Only one point I didn't cover so far in my presentation, which is my closing. In order to do all this, you have to understand this is a revolution also for us internally. It's a massive change. We cannot simply dictate it or send a memo around and make it happen. We have to unlock the energy of our colleagues. That's why we launched this program already at the beginning of 2018. The program initially was focused on simplification, as Mario summarized, but then eventually moved to business innovation customers. More than 1,200 people are already touched by the program, actively touched. They work on more than 700 crowdsourcing ideas from all over the organization.
More than 60 specific projects already accomplished, and more to come. The program is unstoppable. It's like evolution that is happening as we speak. We cannot dominate it anymore. Some examples I give you of what we were able to achieve. The steering committee was mentioned this morning. You understand the importance of things like this. They may sound very small when you hear the first time, but when you think through it means not only that we save all the costs associated with steering committee, which is the preparation, the attendance, the minutes making, the dissemination, not to mention the fact that very often we use steering committee to procrastinate decision, really. We also empower the organization. Now, the message that is going around the organization is, "Don't ask for permission, ask for forgiveness." Act. You know already what's the right things to do.
You don't need to ask. If you particularly do the right things for the customer, you are always right. This is massive also from a change mindset point of view. Also other example, they simplified all our policies. They also worked on the language of our products, so to present them in a much more understandable way. They worked on Commercial Insurance. They accelerated dramatically the renewal process. You must know that in the past, some of our business took longer to be renewed than a new risk because we went through all the process again and again and again. If nothing has changed since last year, you can actually speed up this. Now the process is 15% faster. The same is happening now for the referrals. Our youngest, more junior underwriters use the referral very much to ask advice of their senior colleagues.
This was taking very long in the past. Now it's in two days maximum, they get what they are looking for. It's my pleasure to have a representation of Make the Difference here. There are several ways of Make the Difference, as Mario mentioned, this representation today represents the variety of many of them. Before I pass it to Cecilia, I would like to leave you with one video that give you a sense of how we recruit these people and also how we create the energy into them that then is unlocking the potential of the group. Let's play the video, and then, Cecilia, up to you.
Look, if you want to make a difference, now is your time. Listen to me closely. The world needs you and your ideas. Not just any ideas, big ideas. Ideas which don't follow the rules. Actually, they break them to make them better, quicker, sexier. Great ideas don't keep office hours. They get up before sunrise. It's those ideas which Make the Difference. Now it's on you. Apply them to insurance. Let's completely reimagine insurance. Imagine we can insure things with only a fingertip or just the blink of an eye. Let's be there when it matters, not when it's too late. Let's simplify contracts. Actually, let's get rid of them at all. Why sell complex products? Let's sell a lifestyle. Forget about customers. We want fans. Look, here's the deal.
We can't predict the future. We can build it, shape it, revolutionize it, scrutinize the status quo, and challenge everything you think you knew. Travel the world. Ideate, build, co-create. Become an ambassador. Actually, become the next unicorn. Don't aspire to startups, be the startup. You think you can make a difference? Apply now. You dare? Form a team. Hone your idea, spread it, build a fan base, pre-select it, enrich it, and finally, pitch it to the CEO.
Thank you, Giovanni. We're so excited and so proud to have the opportunity to share the Make the Difference story with you today. Living our best life is important to all of us, and our homes are a huge part of this. A couple of months ago, when I moved to Chicago, I found the perfect apartment in the heart of the city. I didn't choose my apartment because of its location or its amenities. I chose my apartment because it was designed for someone like me, a Millennial, by someone just like me. The developers for my apartment really thought about creating an experience, not building an apartment building. They've developed an app that provided me with the things that I needed the most at my fingertips.
Literally right now on my phone, I could order my coffee, I can get maintenance requested in my unit, and I can even get my laundry delivered to my door. This was a game changer for me. Everything that I need on my phone, just like I like it. I used to think of the lease as a contract, and now I view it as an experience, a living experience. This is what insurance needs to do because the next generation is changing the world. Our team of seven represents that generation. It's not only us. We represent thousands of employees all across the world who not only believe in the work that they do, they truly believe that things can be done differently. Not next year, not next month, but now. This belief, coupled with Zurich's support, is empowering our frontline employees.
This is unlocking Zurich's potential. Let's be clear, the insurance industry does not address my generation's expectations, and we need to change to remain relevant. If we don't, who will? The good news is that Zurich is already on that journey. Zurich is empowering its employees, and we're here today to show you how we are making the difference. I'm so excited to introduce to you our global team, and they will tell you who they are and where they are making the difference.
I'm Verity, and I'm from Glasgow.
[Non-English content]. My name is [Philip]. I'm from the Swiss business unit.
Howdy. I'm Tom from the U.S.A.
[Non-English content].
[Non-English content].
[Non-English content ].
I'm Cecilia from the U.S. As Mario shared, our strategy is not changing, and Make the Difference is grounded on our three strategic pillars: simplification, innovation, and customer focus. Giovanni already shared with you some of the work in simplification that we've accomplished. Today, we're going to be talking to you about innovation and customer focus, because it's time that we rethink how we address customer experience. Because if we don't, somebody else will. Verity will come up and talk to you a little bit more about that.
Thank you, Cecilia. As Cecilia said, we need to start addressing our customers' experiences. First of all, we need to speak their language. At the moment, our industry sees their customers' experiences like this, but our customers can't relate to this. They don't understand it. We need to start speaking their language. Our customers do not speak about renewal. They talk about loyalty. When I started with Zurich three years ago, age 17, my school friends asked me, "Are you mad?" "Why would you want to work for an insurance company? It's too complicated, and we don't understand it." I soon learned that there is nothing complicated about it. We protect people's lives. We protect the things that people really cherish, and we give people peace of mind. We need to start using this lens, a customer lens, to attract people like my friends.
At the moment, we cater for older generations, but it's time to look at the future. The next generation is a huge part of our population, totaling 4.8 billion. They're almost the majority of the workforce, and that is only going to increase, and they are already taking up leadership positions, in fact, at an earlier age than previous generations. My generation are already influencing decisions for the globe. Millennials, they are disruptive. They change the way we do things around here. That is what drives the mass market. For those of you in the audience who may be feeling a little left out, don't worry, because it's not about a date of birth, it's about a mindset. Look at the way most of us watch television.
Gone are the days of going to a store and renting a DVD because we have Netflix driven by Millennials. We don't go and buy CDs anymore. We have Spotify driven by Millennials. Look at WhatsApp, created for Millennials by people with millennial mindsets and adopted by people like my gran. Two generations away from me. The millennial mindset is infectious, and it is the key to growth. As Mario said earlier, there is no doubt that technology is making the world smaller. That is giving the next generation global opportunities. You can see that just in our lifestyle, as Conny highlighted from her slide. Previous generations, they didn't have this benefit, so they are more locally anchored. The next generation, they're huge. Over half of our population. They're influential. Already making decisions for the globe.
They are global, connected by mindset, technology, and social networking. You can also see that previous generations have more of a traditional and predictable lifestyle. Yet Millennials, they have a higher need to reinvent themselves. Giovanni showed you in his video how these differences in lifestyles have impacted our industry and our products. Let me give you some examples, starting with car ownership. The next generation own fewer cars. We need to start considering mobility concepts. They also own fewer homes. We need to address renters' needs, just like we have started to with Toggle in the U.S. To my father's disappointment, Millennials are getting married much older. We need to start considering this in our life insurance policies. We love to travel. I have traveled to eight countries this year. All of this represents change, and that represents opportunity.
By engaging the people you have within Zurich, we have that opportunity to become a trusted partner for the next generation. The evidence is standing in front of you. Zurich's capability is right here. I'm 20. I have just finished my modern apprenticeship, and I'm already engaged to Make the Difference. It doesn't stop here. There are thousands more already wanting to make this change. Philip will now show you what Millennials really need.
Thank you. As Verity just told you, our generation is big, it's influential, and it is global. If we want to design products and services that cater to their needs, we have to address them. We identified the following: community, individuality, and convenience. Let me go into a bit more detail from a millennial's perspective. When I talk about community, I talk about interacting, about sharing with my family, with my friends, with my Make the Difference colleagues, with whom I stay in touch via WhatsApp, via Facebook. I follow their lives on Instagram. It's not just online. I'm also a very active member in my local rowing club, my offline community. This brings me to my point of individuality. As an active rower, nutrition is key. When I get up in the morning for my 6:00 A.M.
session, I don't want to eat just about anything. I need the right fuel to power through an intense session. I got aisles of cereals, but what I really want is the one product where I can order online, pick the ingredients and the nutrients that I need to get me started into my day. Lastly, when we talk about convenience, we Millennials, we grew up with a completely different expectation towards convenience. I grew up with the internet. I grew up with my smartphone, in which I have the world at my fingertips. The first time I went to a bank, went to pay with a payslip was the last time. Too cumbersome. I don't want to do that. Now I only use e-banking. Let's be clear, the insurance industry today does not cater to my needs.
We at Make The Difference set out to change this. We set out to reshape the industry. I will now give you some examples of what we do on community, and then Tom will take over and give you some examples of what Make The Difference did towards individuality and convenience. Community is arguably the hardest from insurance point of view because we lack the trust of this new generation. As Verity told us, her friends, they don't see us as a partner. We do share one important value with them. We at Zurich care about our planet, and we care about the sustainable and resilient future. I'm very proud to work for a company that actually cares. We at Make The Difference started several initiatives. Internally, we started to ban single-use plastic from several of our offices.
For example, in Japan, where Alex works. We also pushed strongly to reduce the usage of printer. Thank you, Richard, for helping us here. As Giovanni told you, we also give our agents the means to go to their clients with a digital process, so they don't have to carry their portable printers that they used not so long ago when they go. We at Make The Difference, we're also very into innovation. We want to change. We can't all do it all alone internally, so we also partner externally. For example, at the Hack Zurich, Europe's largest hackathon, with more than 1,000 coders who spend 48 hours together to work on their projects and present their final solution on Sunday. We partnered with the City of Zurich to offer a challenge on making commuting in Zurich more environmentally friendly.
I'm also very proud to talk to you today about the Zurich Innovation Championship. The Zurich Innovation Championship is our unique way to approach innovation with partners from all across the globe. We took together world-class entrepreneurs, established startups, and we launched it with us last year, and it was a huge success. We have more than 450 startups participating, and the 11 best who managed to make it through the country, the regional, and the global stage are now partnering with us, implementing their solutions. We don't stop here. Next year's Zurich Innovation Championship will be all about protecting the next generation. It's been a huge success so far. This slide is very recent. We already passed the 700 mark. We passed the 800 mark already. We got more than 800 startups who want to make a change with us.
If you know somebody who wants to create a more sustainable future together with us, who wants to help protect the next generation, tell them about the Zurich Innovation Championship. We are still taking applications until the 17th of December. With this, I would like to hand over to Tom, who will give you some insight in what we at Make the Difference did on individuality and convenience.
Thank you. As you've heard from Verity and Philip, individuality and convenience are of the utmost importance to the millennial customer. Now let's be real. No one uses the phone to call anymore. Insurance is one of the last industries that forces us to pick up the phone and call in if we want to get something done. On top of this, they make us refer to ourselves as a policy number rather than with our own name. As a 29-year-old millennial, I find this to be outrageous. You see, we Millennials like to take the power of technology and the internet to search around and find the right fit for us. Zurich has developed, among many, two platforms that I would like to showcase to you that demonstrate our ability to walk the talk.
While these platforms have been designed specifically with the future generation in mind, rest assured that they can be used by all of our customers. I think I can pretty safely say that all of us like when something is personalized to us, and it doesn't feel like it just fell off of an assembly line or is copied from a template. That's why, available right now in the Swiss market, we have Customers Like You. Customers Like You reduces the entire life insurance quoting process down to just three simple questions. When I heard this, I paused and I thought, what would happen to my wife and my one-year-old son if something unfortunate happened to me?
Naturally, I loaded the website, I answered those three questions, in less than one minute, seriously, in less than just one minute, I was able to see three policy choices, a good, better, and best, that detail for just the cost of one ice cream per week, my family would be covered for CHF 200,000. What I didn't see, and what our customers don't see, is the magic in the background, the powerful algorithm scanning thousands of customer profiles to customize this content just to me and detail how my family will be protected if I'm not around to protect them. When it comes to convenience, the ultimate goal is self-service. As a risk engineer here at Zurich, it is extremely important to me that customers not only understand the exposures that face their business, but how to mitigate or protect against them.
Our face-to-face consulting is wonderful. We love getting out in the field and meeting with our customers, seeing their businesses. Let's face it, we can't be everywhere at once, and that's why Zurich has harnessed the power of technology to create an application that can be downloaded anywhere in the world, the Zurich Risk Advisor. Now, when the Zurich Risk Advisor was first launched, it was created for multinationals. This left our local business champions and our entrepreneurs underserved. As Verity mentioned, we Millennials are already here making up a major part of the workforce, and we're the ones risking it all to start businesses and build brands. We set out to change this. In the spirit of being customer-led, we came together, we sat down, and we listened. We truly listened to the experiences, the journeys, and the stories of these business champions and entrepreneurs.
One of the most insightful conversations I had was with Rhonda. Rhonda is the owner of a cookie store on the main street of my hometown in Missouri, U.S.A. In speaking with Rhonda, it was very apparent that she's wearing multiple hats every single day. She's the CEO, the CFO, she's marketing, she's working the front line. Surprisingly, she's more worried about making payroll this month than she is worried about a fire or cyber attack that would shut her business down. I was startled when I found this out because more than 40% of small businesses never reopen after a major event. Furthermore, out of those ones that are lucky enough to reopen, another 20%-25% fail within just one year of that same event.
When our global team of risk engineers came together, we broke down the technical information, and we simplified the expertise of 1,000 risk engineers and safety professionals so that it could be disseminated to millions of people around the world, allowing all customers, and specifically the future generation, to protect themselves at their convenience. If you've not already downloaded the Risk Advisor, I hope you take a moment to do because it is truly a unique and powerful tool. Once you have it downloaded, be sure to share this with any millennial-minded friends, colleagues, and coworkers you have. As Giovanni mentioned, this is just the tip of the iceberg. We have so much more that we've already completed and is in development right now that I hope you stay tuned to our next strategic cycle.
Today, we've really shared with you how Make the Difference is truly laying the foundation for the future at Zurich. This is just the beginning. Like we shared with you today, the next generation is changing the world. This is happening right now. We need to continue to unlock Zurich's potential because we need to change to remain relevant. The great news is that Zurich is already in that journey, and in our journey, we learned a few things. We've learned that it's not about processes, and it's not about systems or IT, and it's definitely not about hierarchy. You're probably wondering, what's it about? It's about people. We are empowered. Zurich is investing in us, the future, and we are invested in Zurich. The question today is: Are you?
Yeah. Thanks, Cecilia. We'll now come to the first of our Q&A sessions. If I could ask Mario, Kristof, Conny, and Giovanni to join us on stage, we'll take your questions. I know that we're running a little bit over, so we'll run a little bit into the lunch break but not too long to leave everything getting cold. Who'd like to start off with the first question? Nick Holmes, down here in the front, second row.
Nick Holmes with Soc Gen. A couple of questions. The first, in retail, I wondered what's your approach to dual pricing? This is very much a customer issue. Do you see an opportunity to reverse an industry bad practice by rewarding loyal customers who aren't normally rewarded. Secondly, a strategic question. I wondered where you see the life business going. Is 25% of earnings the right level, or do you want to take it above that or below that? Thank you.
Can I start with the life question and maybe Giovanni, then I pass it to you for pricing, and you can help me on life, Kristof. Look, of course we want to grow life. Right? Of course, we think that there are opportunities with the partnerships and in our positioning on products to grow life. However, that's not the way we think. We don't have a perfect mix in mind. We just want to chase the customer needs and deliver to the customers what they want. We don't reverse this engineer saying, we want life to be this much and property and casualty this much, we want to achieve the above 50% coverage of the customer needs, and we want to remain as profitable and as relevant as we are today in commercial.
Yes, Kristof has been leading life some years ago, and now is working on the life technical excellence. We're taking lots of initiatives, not with a precise target in mind, honestly.
Yep. We've had very good historical growth in the life business. If you think about how our book is positioned, we're one of the largest protection players globally. Which is the space in the life insurance industry where there's still tremendous growth. This industry is still looking at a massive protection gap. I think with what we're doing on the protection side, with some of the innovation, with bringing in Wellcare as well, I see that as a major driver of growth.
On pricing, if I can answer. First of all, we are very aware that if you go after growth, you could sacrifice profit. That is not our intention at all. Therefore, we are investing a lot in pricing sophistication, dynamic pricing. Your question was very specific about, are you ready to reward loyalty? Yes, we are studying also this. There is an opportunity that we are already exploring with Wellcare, for example, where we are providing rewards, physical and practical rewards to our customers if they exhibit the right behavior and if they stay longer. If you think about the economics underlying what I showed before, there is also a possibility to share more with the customers if they stay longer. That's an area that we are exploring.
It's too early to say exactly how it's going to be working, also because it's very new in the industry, but it's clearly a direction that we like.
Okay, Andrew Ritchie on the left-hand side. Andrew, can you keep your hand up?
Hello. It's Andrew Ritchie from Autonomous. A couple of questions first for Kristof. Kristof, I remember meeting you at the beginning of this journey, end of 2015, early 2016. There were a couple of things. You were very keen on improving understanding of aggregation exposures, accumulation exposures. That was part of your project. Can you just update us on where you think you are on that with respect to both CAT and, let's call it manmade or casualty aggregations? Also, you were very keen on improving the data flow. Zurich had a lot of information from risk engineers, but it wasn't always ending up with the right people at the right time. Where are we on that process now as well?
The other question, I think with this retail initiative, does this mean you're going to start to try and target markets where you're very strong in commercial lines, but not so strong in retail? Take the U.K. I appreciate I'm a bit old, and probably not the target customer, but if I have a term life insurance policy from Zurich, I think my employer has an employer's liability policy from Zurich. It's very hard for me to buy a home insurance policy from Zurich or a motor insurance policy. Would that be an example of a market where you can sort of pull it together and say, "Actually, there's an opportunity here"? Is it simply on existing markets where you have existing retail strengths?
On the accumulation management, and you're right, back in 2015, that was one of the things that took us by surprise, the famous Tianjin event. We've made massive progress since then. Year on year, we see us progressing from accumulation management perspective. We actually get it externally validated as well. We score very well against the rest of the industry. That's not just property, but that's also all the adjacent lines. That goes for casualty as well. By and large, I'm very comfortable where we're at with our accumulation management capabilities. On the piece around data, you'll see in the presentation from Jim this afternoon, what we've done on Insight360. What that is really taking that front end and starting from the pricing tools.
This is why it's important to link it to the example I gave on simplification of pricing tools. Pricing is typically where we take some of the first information around exposures and risk rates, et cetera.
Having consolidated that has been a massive win for us. Insight360 goes a level further, it actually links at the underwriter's front desk, that pricing data together with exposure data, together with claims data as well together with risk engineering data. Some of the cool things that it now allows us to do, if I'm, for instance, I'm a marine underwriter sitting in Belgium, I can actually see the entire portfolio of exposures. What's important is understanding the marine routes, because those are typically the ones that drive the profitability of those lines. I get access to the entire global portfolio. I can map my portfolio against that. I have massive insights, from different sources. It's not just about the risk engineering data. It's really bringing claims, exposure, pricing data together at the line of business at a global level.
That's what we've done over the last couple of years.
On your second question, this is clearly an attractive opportunity. Two things that we like a lot about the Millennials segment. It's A, you don't need to rely on a large installed capacity, physical distribution capacity in order to reach them, because they actually go and use different medium. Second, they seems to have global needs. They are very similar from one country to another in what they are looking for. If this is true and it seems to be true, we can definitely take advantage of both situations to go deeper in addressing them also in markets where we are not so strong in retail at the moment.
Whether this will be a specific opportunity for U.K., I think it's early to comment because entering or pushing in a market depends also on many other consideration like our strength in terms of brand, the positioning, the competitors presence, the dynamics of the market. It would be a much more articulated decision, but clearly is an opportunity.
Andrew, we have some other examples in the room of people who really wanted to insure their homes with us. We disagreed on the quality of their homes. They couldn't. I don't take any promise on U.K. today.
Let's go one on right here.
It's Johnny Vo from Goldman Sachs. Just three questions, I guess. There's a big focus on customer growth. I guess one of the questions is, as a percentage, what customer growth is coming through the existing channels, and how much do you expect to come through new affinity or partnerships? That's the first question. The second question is just in relation to growth in partnerships. Clearly, that's a big area, particularly for retail customers. How do you reconcile this with getting closer to the customer? Doesn't it mean that if you have a relationship with a platform, that actually the platform owns the customer rather than yourself and the product becomes very commoditized? The last question, just in regards to commercial lines as well. The environment's quite positive. Does this mean that we should see a resumption in growth on top line for the business? Thanks.
All right. I'll try to address the question on commercial. Jim, we talked this afternoon. Definitely the business is growing. It's growing because of the rates, and it's also growing because this gives us opportunities to contact customers, who in a soft market were not interested to shop around. On the other questions, first of all, between distribution channels, I can't give you a precise number, but we are relying on partnerships in direct channels much more than we rely on agents and brokers by the nature of our business and by the nature of our configuration. We have markets where we have strong agencies business. Broadly speaking, we believe and we have developed very successfully the partnership concept around the world. In terms of who owns the customers.
Now, if you ask the people there in the second row, they would tell you that no customers wants to be owned by anyone. They're owned by themselves. This is the main challenge that the Millennials are bringing us. No one is controlling them. They're free to move. They're free to get information and to make their choices. That's why what Conny said was so important. You hold them together with you through customer experience. Nothing else works because they move. They're free. What happens over the last years? That technology gave them the freedom to move and make choices. There is no way in which you can put them back in the cage, whatever you do. The only thing is the customer experience. You give them the customer experience they're looking for, and then you have the stability of the relationship. Nothing else can work.
Farooq, just.
Thank you very much. It's Farooq Hanif from Credit Suisse. SME has been kind of a bit of a holy grail in a way. I think everybody wants to do SME insurance. It's profitable. Could you tell me kind of which markets you see the greatest opportunity for growth in sort of penetration into that? What investment you'll have to make on the proposition products platform? How much of a mix shift we're going to see in this channel? Thanks.
Farooq, the market where we started early on working on SME, Switzerland. Switzerland is a natural configuration for SME.
Switzerland either has SMEs or has global corporates. Funny enough, there are very few mid-market companies in Switzerland. Switzerland started in 2018 focusing on SMEs. They started this year with a thorough new offer for SMEs, and with a digital offer, and with an agency offer. This is one of the driver of the growth of Switzerland this year in the market, is exactly SMEs. Germany is following up with the same principle. Broadly speaking, we think that there is a big opportunity for this in Europe. That is where today we're focusing investments. It's not really a lot of investments needed. It's more about simplification more than investments. You have to go to the SMEs with a simple, clear, focused offer. It's more what you take away than what you need to add. It's frankly not relevant to talk of investments.
On the business mix and the results, well, let's keep something for next year, Investor Day, right? We'll have that.
Jonny Urwin on the left-hand side.
Thank you. Jonny Urwin, UBS. Two questions on retail, please. Of the existing markets, which do you think are most accommodating for you to grow in right now? In terms of the overall sort of footprint, where do you feel underweight and where might inorganic growth help? Thanks.
Underweight. I think Giovanni showed that seven markets make 75% of all our retail business, and of course Farmers. U.S. is a very important component of this size. Where are we underweight? Can I flip the question? Are there markets where we would have an aspiration for being stronger in retail? Maybe some European markets. We definitely will look at U.K., and we've been trying in U.K. different ways to grow in the U.K. markets. Frankly, in life we're quite strong, but not that strong in property and casualty retail. I wouldn't really consider, though, on what next that we have to expand, because we have enough opportunities following organic growth and organic opportunities in the markets where we are.
These seven markets are big, big markets. As we tried to argue before, even with existing customers, we have immense opportunities to grow our business, that we shouldn't go looking out of it.
I think come down to the third row. Jon Hocking in the middle.
Thank you very much. Jon Hocking from Zurich. Just one question, please. Conny, your presentation, where you're talking about brand consideration and how important it is to be in the sort of top three or four companies, how does that map onto an increasingly complex distribution environment where you're distributing through partners, where presumably your brand may not be visible in the same way that it was traditionally?
It comes back to the relationship that Mario talked about, and having the awareness out there. We think brand consideration has a lot to do with the brand strength. The way we work with partners and also with agents that Giovanni was telling about, is that we are providing tools to help them on that journey that links back to us, so we can drive that brand considerations with the agents.
If you can just pass the mic along to Vinit.
Thanks. This is Vinit from Mediobanca. Three quick ones, if I may. The first one is, Mario, you talked about retail and SME, which from the external view are one reported segment. I'm always struggling in my head, which are the numbers I'm looking at for which segment and which kind of customer base? Today's presentation is massively overweight retail. In fact, I could pinch myself at, am I actually in Yes. Far. Even in the whole conversations we are having on retail, how do you distinguish between retail and the SME? Because retail is still a smaller part of even that retail segment. Am I right or? That's the first question, if I may. The second question is just happy customers come from probably two elements, service and money. If they get their money, they probably are happy.
If they don't, then I don't know what will make them happy. What's your experience of the data? Is there some check internally done that, hey, we paid these guys a lot of money and now they're happy, so the customers, or something else happening? The last question is just for Kristof. You mentioned MedMal in Swiss, and it triggered some different memories in my head. Just almost a decade ago to the same day today, we had this problem in Germany, MedMal. Are your softwares learning from or trying to learn, at least within the group, the experience? Because you're giving the kind of MedMal to an engine. Of course, I'm old as well, but it feels a bit like, wow, we've had one problem in another market. This is one area, whether the loss and the cost saved, where do we go?
Just some thoughts.
You want me to start with that one? Okay. The way we are using it, and it also goes back to the ethical use of data. We don't use any black boxes that we do not understand. Even when we run some of the new technology, ultimately, it has to go back to a deterministic model that actually allows us to understand what variables drive it. Yeah. In most cases, this is decision support. The ultimate decision is still made by a claims handler. Now, there's a difference between making an individual claims decision and then looking at the overall shape of a portfolio and long-term trends. We look at our portfolios on a global basis. We call it the virtuous circle at a global level, where we put underwriting, claims, finance, and my organization together to look at some trends.
We have learned from trends on the med mal side because we have seen a few books where we had issues. We've learned from that. We've structured our portfolios in such a way that coverage and wording allow us to be profitable within those segments. That is more a portfolio piece of work than at the individual case.
Look, on retail versus SMEs. Yeah, I understand your question. It's always blurred where one finishes and the other starts. Retail is individuals, right? SMEs are companies, which are made of a few individuals. This is really the characteristic of SMEs. Three, four people make a company. It could be a grocery or it could be a travel agency, or it could be any kind of food shop. Yeah, it's blurred, and this is why we gather all together them into one sector, which for us is retail and SMEs. The other thing which for us is unifying is that with them you sell products, you sell solutions. These are not customers who can spend their time with risk advisory, with the complicated risk management tools. They don't have time, and maybe they don't even have the interest to do that.
You've got to be very, very simple. The more you move up, the more tailor-made is the solution. Some of Jim's customers are fairly complex in their needs and in their capacity also to discuss with us. Your second question on service and money. Look, I think the money is the same for everyone. I don't think you can make a proposition, and definitely we don't want to be the cheapest company, so we don't really want to compete on money, but we need to be fair on the cost that we have. Service is what really matters. Again, what you heard many, many times today is that customer experience is the differentiating factor. This is the service. People can't stay with you just for money. That's not what this industry is. It is about the service.
This is where the competition will be and where you need to have a competitive advantage. With a premium service, you keep the customers. Without it, you won't be able to sustain the customer relationship.
Peter Elliott here in the third row.
Thanks a lot. Sorry, Peter Elliott from Kepler Cheuvreux. Maybe just to carry on that last point. We've heard some examples where there's a big protection gap, or a big need for insurance. I think there was a number quite early on in the presentation, 30% of needs are being met. I'm just thinking that involves going quite a long way far down. We heard a lot about you're making sort of people aware or making it easier for people to buy insurance and making them aware of it. Is there a risk that some of those products they maybe actually don't need? Insurance is about protecting yourself from losses that you can't afford not to make.
How do you manage that risk, I should say, that people might be presented with things down the line that actually is beyond their need, if you're talking about sort of very small purchases? That's one question.
You're talking about, is there a risk that sales would not be compliant with the principle, and so we would sell bad stuff to customers, to make it simple?
Not bad stuff, potentially.
Unnecessary stuff.
What might be necessary to one person might be unnecessary to another. Yes, if you're offering a huge range of products, then potentially you probably have more, maybe there are some instances where you have more information than the customer as to whether that actually is a product that they really need.
Yes.
Yeah.
Yeah. Is there a risk? Absolutely. We think we carefully manage this risk. Some of these things that we discussed during the day allows us to better control the risk. For example, the tools that allow you to be profiled by us. Understanding who you are and what you need also guides then what sales you will receive from us. That is a controlling mechanism for us too, that you don't get an offer which is contrary to your interest. Let me also point out to you one thing. More and more, we're trying to sell prevention systems. We're not trying to sell you something which is going to reimburse you. If possible, we want to avoid damages. Damages are very bad. They're not just bad for us because they're expensive. They're bad for all of us as customers.
We don't like to have a damage at our homes or personally on us, on our cars. The best thing you can do for the customers is to give them something that helps mitigating the risk of a damage or eliminating the risk of a damage. More and more we're shifting towards that. There is the risk that we will sell things which are not necessary. Yes. We're trying to manage and mitigate this risk very carefully.
If I could just ask a second question, to more specific, to Conny. We had the various NPS scores, and obviously the U.S. was negative because you'd broadened the set. Are you able to tell us what it would be on a comparable basis? I'm assuming you might have the data on just the old set.
I wish I had. I actually thought about it when I was saying that. Like, "Oh, I should have brought that data." I can't answer the question to you directly now, but I'm happy to get back on it.
Okay. Well, I think we'll close the Q&A there in the interest of people being able to actually eat today. Lunch will be served across the other side of the hallway. Obviously, management will be around over lunch. Please feel free to ask further questions that you've still got on your mind. We will have another Q&A session at the end of the day where we can run a bit longer if necessary. If I could ask you all to be back in here punctually at around 2:00 o'clock, that would be appreciated. Thank you. All right. Thank you very much, everybody, for coming back promptly. Obviously, we now turn to the afternoon session. We've got two presentations. First from James Shea, our Head of Commercial Insurance. Then obviously George will follow up with the financial performance. After which we'll have our second Q&A session.
I appreciate this morning's Q&A session was a little bit cut short, so if there are additional questions that you didn't get answered over lunch, we can run a little bit longer at that Q&A session this afternoon. With that, I'll hand it over to Jim.
Thank you, Richard. George and I were joking over lunch that we've saved the most exciting presentations for after lunch. Good afternoon, and welcome to our session on the commercial insurance business. My name is James Shea, and I've been the head of commercial insurance for the past three years. I'm excited about the opportunity to tell you more about our business, how we have delivered on our commitments made three years ago, and how we will continue to deliver to help the group meet its targets over the next cycle. We've solidified our position as a top three global carrier in the commercial market. We've accomplished this by investing in strong underwriting culture focused on long-term sustainable profitability. We've invested in data and technology to support our underwriters to make better underwriting decisions. We've shifted our portfolio mix through focused risk selection, improved terms, and of course, pricing.
We've delivered a level of consistency as demanded by our customers and our distribution partners. We'll continue to invest in people and tools to keep underwriting at the forefront of what we do. Recently, Mario and I had a meeting with the CEO and management team of one of our largest distribution partners, and his comment to us was he believed that Zurich was one of two markets that are stable, while he sees the remainder of the peer group struggling with the inconsistencies and changing in this marketplace. To reiterate the message we want to leave you with today, we've had a clear plan on where we want to take Zurich in the commercial market. We are already a top three global commercial player with the potential to improve. Our history, our brand, and our global footprint serve as the foundation upon which we've built.
Our profitability has improved significantly since 2016. This occurred despite the headwinds of a soft market and is the result of an execution of a clear underwriting and portfolio strategy. Consistency of underwriting discipline, risk appetite, portfolio, and customer focus have all played pivotal roles in the results that we've seen over the past three years. We continue to bring additional services to our customers as they increasingly look for insights and risk mitigation services in addition to the transfer of their risk. We have the agility to drive further change in the market and opportunity to change opportunistic markets as permitted as the cycle continues. Just briefly, I'm originally from Canada. I have two children who are dual citizens of Canada and the United States, and my 16-year-old daughter loves to send me texts of Canadian jokes. She lives in the United States.
The most recent one was: how do you identify the Canadian in a crowded room? You step on everyone's toes until someone says sorry. Apparently, I'm more comfortable apologizing than promoting the achievements, but let me try because I do think the results do speak for themselves. I just want to remind everyone where we came from. This is not the result of any single person or any single strategy. This was the result of over 12,000 people across the globe working towards change. This support came from all levels and all functions of this organization, and it was contagious. We committed to moving our portfolio away from long-tail liability towards a more balanced mix. We achieved this and are well-positioned to take advantage of the changing market.
We have refreshed our product offering, have consistency regardless of whether we're approached in the United States , the United Kingdom , Australia, Argentina. We have become one Zurich. We are not afraid to ask customers for business and have increased our share of wallet with a focus on lines of business that we want to write. A few years ago, I was meeting with one of our relationship customers, and for this customer, we wrote their global fleet program. We asked that customer if we could have the opportunity to quote on some of the other lines of businesses, some of the more probably higher margin lines. The response was, "Well, those lines are with our other strategic partner," who, by the way, doesn't write fleet programs.
I'm pleased that today, we still lead that fleet program in a captive program where we share the risk, and we share the outcome with the customer, but we also lead four other lines of businesses for them, all because we asked. Brokers now understand our appetite and know we are committed to our customers, but we'll apply our own underwriting standards. They know not to approach us in different markets for the same risk, looking for the weakest link. One Zurich, one response. We even developed an app for our brokers that described our risk appetite, there was no excuse on their part to us to say they didn't understand it anymore. Our lack of balance between process and underwriting had resulted in some adverse selection and loss of underwriting talent.
This has been the biggest change over the past three years, putting underwriting and underwriters first, give them the tools to facilitate the decision, empower them to decide. As Kristof mentioned this morning, we've simplified our tools, providing real insights and data analytics, automated many of our processes. As stated earlier, we did this during a soft market, maintained our reputation, empowered our existing underwriting talent, attracted new skills and talent to the organization. Having spent the last three years focused on these changes, we're well positioned to capitalize on the growth in this changing market. Some key metrics. We have delivered on both our loss ratio and expense ratio targets. We achieved this through improved efficiencies across the organization to where we believe we are the most efficient carrier amongst our peer group.
We invested into underwriting talent and culture, which allowed us to drive a different portfolio mix, improve our risk selection, and execute a different exposure and capacity management strategy. We delivered a consistent external message to all customers and business partners. During my first month at Zurich, I had the opportunity to meet with an existing customer with whom we wrote multiple lines of businesses, but we didn't write their property program. I asked if we could have the opportunity to quote the property. The customer responded very politely, "Absolutely. You're more than welcome to quote our program. You realize you wrote it for 20 years, had no claims, and canceled it on me last year because it no longer met your risk appetite." This approach was driven by a model with a process-focused KPIs as opposed to underwriting.
That type of inconsistency doesn't happen anymore. I want to show you some proof points on how and when this change began. Based upon the Marsh Index, we've tracked our rate increases compared to market performance. We started earlier than most of our peers in the marketplace. The exception to this, which people will point out will be Asia-Pacific, and that's driven by Australia, where the market saw significant increases in financial lines and other lines of businesses that we didn't have a significant percentage of that market. This demonstrates our early execution of rate and risk selection initiatives. It clearly had an impact on our top line, but has positioned us better and is a key contributing factor to our improved performance over the past three years.
Everyone talks about rate, and while it is critical, of equal concern over the past several years has been the broadening of the terms and conditions. We have focused not only on rate, but also risk selection, terms, conditions, and program structure. While rate is easiest to measure, we do track other metrics. Capacity has been managed down, deductible increases on larger risks and programs restructured. In U.S. property, we've reduced our exposure to hazard grade four or five, which is the highest risk categories, by 37% in 2018 and a further 17% this year. A continued focus on U.S. CAT, wind, California quake, also managed down over the past three years. In addition to policy changes, we shifted our portfolio mix. In terms of portfolio mix, we focused on what we set out to do three years ago.
We reduced our dependency on long-tail liability, especially in the United States , with a 31% reduction in the liability portfolio, and we've reduced our motor fleet portfolio globally by 18%, including exiting several markets. Our shift to specialties didn't go as far as we had hoped to in 2016. The reason for that is the specialties market has changed. In financial lines, we focused on either reducing or exiting some loss-performing lines of businesses, architects and engineers, professional indemnity for large IT companies. We didn't feel that the D&O market was poised to grow, particularly risks that had exposure in the United States and Australia. Credit and surety. We have a significant portfolio in credit and surety, and it's been one of our most profitable lines of businesses over the past decade.
We've taken a more conservative outlook on the credit markets and have held exposure flat and even a downward trajectory in several markets. A&H investments for commercial customers began over the past 18 months and will continue to show good growth through the next cycle. We will continue to remain agile to take advantage of opportunities as they arise, create opportunities for ourselves, but be prepared to take conservative positions and actions when needed. Taking a look at where Zurich sits amongst our global commercial competitors. We are a top three global player regardless of how you measure commercial insurance. The gross written premium split by region is reflective of the overall global commercial marketplace. We are, for example, well captured to capture growth in the emerging markets. Our acquisition of QBE in Latin America has given us scale and capabilities in that region.
Our focus in Singapore on the hub for Southeast Asian business are two good examples of our investments and focus on geographical balance of our business. Our investment focus goes beyond building a stronger underwriting community and improved data to make better decisions. We've invested in our international platform to service our largest global customers. We have the industry's largest network with over 160 partners supporting our customers across 217 countries and jurisdictions. We have won the European Captive Insurance Provider Award three years in a row. Our captive strategy allows us to focus on risk sharing with our customers, driving improved loyalty and increased partnership as we share in the same outcome with our customers. The captive strategy has also proven to be an excellent source of fee income.
We have one of the largest risk engineering teams in the industry with 1,250 risk engineers globally, focused on supporting both our underwriting community and our customers in terms of the risk management, risk mitigation, and risk servicing of their business. I'm now going to show you a short video on how we continue to incorporate technology and data into our risk engineering services, supporting both our underwriters and providing risk management to our customers.
Our global risk engineering platform processes and digests all documentation and materials provided using a set of comprehensive state-of-the-art tools. It enriches the information received with available data from external sources. If an on-site risk assessment is required, the tool chooses an available risk engineer and passes on all available information electronically. During a tour of the factory floor, the Zurich smart glasses automatically scan the environment for potential risk improvement actions and mark them accordingly. Part of the assessment is an aerial inspection using an automated drone. The risk engineer discusses risk improvement actions with the customer. For example, the forest is too close to the factory and the potential risk of wildfire is high. The Zurich Risk Advisor app makes the Zurich knowledge available to all customers.
Let's look externally now. The market is changing significantly, not just in rate and capacity environment, but we're well prepared for this. We're positive about the change. Our focus and investments have given us the agility to adapt to these changes, and I'd like to discuss a few of them right now. Firstly, the distribution landscape is changing. We're all aware of some of the consolidation that's taking place in the brokerage communities and brokerage market. We are well-positioned for this change. Just under 50% of this portfolio is with the global top five brokers. The rest is with regional, middle market, and the global broker networks. We are investing in our infrastructure and management information to become a market of choice for the regional brokers with dedicated resources and commitment of time to their management.
We've also invested over the years in strong direct customer relationships, which have enabled us to have direct conversations and planning directly between ourselves and these customers. Now, I competed with Zurich for a little over 22 years. I can tell you that the competitors do view Zurich's customer relationship model as best in class. When you were trying to take an account from Zurich and it was a house account, it was very difficult. I believe that Zurich still maintains that number one position in terms of how we managed customers and our proximity to those customers. Another good example of our focus on the customers is what we've done internally is we've taken our global leadership team, which is approximately 100 people, and we've assigned to each of the executive team three customers to be an executive sponsor.
I think it's very important for all parts of management, whether you're market facing or not, to interact with the customers, and understand how all parts of our organization do influence the experience a customer has when dealing with us. Oops. Let's go back. The second point is customers now want more from their insurance partners. The level of sophistication of buyers and their approach to risk management has changed. While risk transfer remains important, risk management and mitigation have equal importance. Our experience and data on risk, losses, and loss prevention positions us well to service this need. Clients like to work with insurance carriers with these capabilities. Many of the smaller markets have not invested to the extent that Zurich has or invested at all, and therefore have become dependent on the rest of the market, and they become a follow market.
As mentioned earlier, we have the second-largest risk engineering capability in the industry with over 1,250 risk engineers located globally. The role of the risk engineer has also changed over the past 20 years. Previously, the focus was on fire prevention. Now many customers have sophisticated and risk management solutions for these traditional risks. We have one customer who tells us that, "Okay with the fire risk. I have my own fire prevention services that rivals the fire department of most cities." What he looks to us in our risk engineering community is to help identify future risks and additional risks. New services include supply chain exposure monitoring, employee benefits benchmarking, cyber risk mitigation and post-loss support, workers' compensation medical support, and as we recently announced, launching a climate risk service capability next year. The sales of such service to customers has been more challenging.
It's sold via underwriters during the underwriting process. We're building a holistic global service model to bring a sales culture approach to customers and services to complement our underwriting and risk transfer capabilities. Our approach to risk management is more closely aligned to the customers. Zurich and customers have a vested interest in improving the risk. Thirdly, the changing market. We're all hesitant to call it a hard market. It's certainly something that is improving and changing. The years of declining rates and broadening terms seems to have come to an end. This has been a challenge for the entire industry, which has generations of underwriters, brokers, and risk managers who built careers lowering price, broadening terms and conditions, and delivering great news to their CFO every year that the price of the insurance purchase has come down.
We began early to focus on the training, attracting, and retaining underwriting talent in anticipation of this challenge. We have also ensured support across the organization for all countries, regardless of the level of the local experience. Compared to 10- 15 years ago, risks are increasingly mobile. It's not just local versus the London market anymore. Recently, we've seen Australian D&O risks presented to us in Belgium and in California. Nothing wrong with Belgium, Kristof. In LATAM, we see the risks that are presented to us in the local market. They're presented to us in Miami, they're presented to us in Madrid, and they're presented to us in London.
We have a connected network with expert to expertise which drives the consistency, and we've invested in this structure accordingly. Customers and brokers need to receive a consistent appetite and expertise for all risks presented to Zurich, regardless of the country. Our global network established with hubs and centers of excellence to support underwriting ensures a one Zurich experience. Over the past three years, we've focused on products on a consistent global offering to support multinational and a growing middle market customer segment. The market has driven broader and bespoke wordings around the world. 10 years ago, when a claim came in, regardless of the line of business or the jurisdiction, we knew what the coverage was. Today, we have to ask because the market has driven such broad terms and conditions adapted to local markets.
This has changed, and we've been investing in the consistency, and carriers are now driving terms and conditions, not the brokers and the customers. We're not trying to be all things to all markets. To say we're going to invest in the middle market sounds easy, but it is difficult. We're selecting the markets we want to invest and grow. We're changing our model to address this. In terms of service, combining risk transfer and risk mitigation services, we know what customers want. They want us to bring our knowledge, our products, our services, but also the relationships which we've developed with third party vendors. We've partnered, invested in third party vendors to bring expertise and support to our customer service proposition. Cyber, telematics, and supply chain are just some of the examples. We are foremost an underwriting organization with a strong customer focus.
We value underwriters to make decisions and invest in data and technology to help them make better decisions. The models don't decide on their own. Talent is developed and retained with our voluntary turnover dropping significantly over the past three years. We also attracted new underwriting talent at all levels of the organization. I'm now going to show you another video which I believe demonstrates some of the investments we have made to improve the life of the underwriter and help them make better decisions. It brings us right.
Underwriting. Underwriters must evaluate many attributes and data from various sources. Until recently, they had to access multiple systems that didn't always offer complete data, making it time-consuming and difficult to digest information which results in fragmented insights. Insight360 helps the underwriter visualize the account data by centralizing information. Portfolio managers can use Portfolio 360 to select a line of business in a country and investigate the respective KPIs. They can now more easily investigate to see which industries have been driving this result. Policy 360 offers granular policy level insight into performance and exposure and provides the underwriter with a holistic customer view. For example, they can benchmark the attritional loss ratio against other exposures in the same region and written within the same country.
At the top, underwriters can see a summary of the risk engineering KPIs of the 1,700 locations, or they can drill down within the interactive map where they can filter by location occupancy, hazard grade, risk engineering assessment status, to name just a few. They can also add several map overlays to enhance the analysis. For instance, satellite imagery, historical claims, and natural hazards exposure. The tool gives us the ability to visualize global trends. Here we see our insured cargo values, trade volumes across routes, and loss experience along those routes. Insight360 allows the underwriter to approach the customer and the risk holistically with all data in one place and insights available at their fingertips.
Moving to some lines of business and segment comments. Not all lines are viewed the same. We have a broad geographical diverse portfolio with significant scale. The key message is we see rates stabilizing or increasing across all markets. Where we see rate increases, we anticipate lower retentions as a possible outcome. We focus on risk selection resulting in either flat to growing top line with a better underwriting performance. I've briefly discussed our view on the credit lines. These have been some of the most successful lines of business delivering a consistent profit. The credit market has been good for several years, but our going forward view is less optimistic. As we look forward, we don't believe this market will continue to be as positive and have decided to manage our overall exposure flat and potentially down in the credit space. We're not trying to time the cycle.
We're being more stringent with our credit requirements and the agility to bring down our overall exposure is our plan. This is our view today of the lines of businesses. We have the agility to change and grow where we see the opportunity, but also the agility to shrink exposures and top line as needed. We've talked about the middle market, and I wanted to give you some further insights into our decisions. We're defining middle market as companies with turnover between $ 25 million-$ 500 million. Anything above that, we refer to as a large corporate. I believe these definitions are fairly consistent within the industry. The complexity of underwriting and exposure can vary between lines of businesses, but this market is expected to see continued growth over the coming years. Our brand has been built largely on the corporate sector and something that remains our key focus.
The global mix between these two segments mirrors closely our own portfolio split. Middle market business is historically less volatile with lower loss ratios. We're investing in key areas to adapt our infrastructure to compete on a larger scale. Our DNA still remains in the large corporate space. This is a good example of our middle market strategy in the United States. We've made some mistakes in the middle market in the U.S. We've identified it, and we're fixing it. We are rebuilding our underwriting expertise and bringing a balance of underwriting models and automation to the process. We need all of them to be successful. In this retooling process, we're hiring the right type of underwriters. We're not trying to apply large corporate models and skill sets to these customers and distribution partners.
We're going to the customers and not relying on them to come to us in the major centers. Centralization doesn't work in a market dependent on relationships. We're opening 20- 30 new locations across the United States, three new offices alone in the past few months. Managing the distribution partners in a different way, closer relationships, and performance metrics. We have to treat them differently than we do the large five brokers. Improving our service standards. Giovanni discussed this morning the opportunities investment in the retail space and how we intend to service those customers. While we are investing in data and technology to improve our underwriting outcome and facilitate the process, we cannot lose sight on the services we need to provide to all customers.
For the middle market customer, bringing insights from our global experience and scale and making it relevant to them and their industry is critical. The risk engineering tool I showed a video on and what we saw earlier this morning is an example of how we've adapted this experience and expertise and brought it to the middle market customer. The service standards in our industry have to improve. Getting the basics right in this space is a differentiator. Fast response, industry specific products, fast and fair claim settlement. Get it right the first time. This is where we are investing. I've mentioned Accident and Health. There are a select number of lines of businesses that we don't have scale or exposure. Aviation is one example. We prefer to remain on the sidelines. We'll look for signs of sustained improvement before considering to enter. Accident and Health is different.
We already have a strong portfolio across life and retail, opportunity to grow in the corporate space with a greater focus on the accident side. Focus on products such as business travel accident. We already have an existing strong customer relationship and distribution platform for this business. There's limited competition with such global capabilities as this truly global program covering employees as they travel around the world. Coverage includes sickness, accident, or any loss while traveling on business or leisure. Benefits can include emergency medical expense assistance, personal accident, and travel inconvenience benefits. Our acquisition of Cover-More, as discussed earlier this morning, only complements this initiative further. I've talked about the need to complement risk transfer with risk mitigation and services. We're going to take this one step further and bring our risk management services offerings under a more holistic proposition. Underwriters do not always make the best salespeople.
I know. Our service platform will provide support to both our underwriting community and with our risk selection to our customers. By consolidating this into a focused offering with a sales culture will allow us to consolidate and add to our existing service platform. Volatility and improved margins remain our key measurement of success. We continue to focus on multiple levels to achieve our results and contribute to the group's performance. Rate is obvious, but continued focus on risk selection terms and conditions is imperative. We believe we started early, and we will continue. The top line has not been our focus, but we are taking advantage of the current market and have the agility to be opportunistic when needed. Volatility has stabilized since the fourth quarter of 2015, driven by many of the actions that have been described to you today.
We believe we are the most efficient amongst our peer groups, but we're not relaxing our focus. In conclusion, I've provided you with insights into the progress we have made and where we are going in the commercial space. We do have a leading market position. We're building on our brand, global footprint, and financial strength. We have delivered to our customers and distribution partners the consistency of underwriting and risk appetite they require, along with claims and risk management services. Our profitability has improved over the past three years, and our portfolio mix strategy has taken us from overweight and long-tail liability and limited focus and specialty, to a better mix of business, a platform to continue optimizing our segments, our products, and our geographical footprint. All of this will continue to support our growth across all geographies as One Zurich. We are well-positioned to compete globally.
We've invested in the right level of underwriting talent and understand what our customers want and need. Customers depend on our knowledge and network to navigate and grow in this ever-changing marketplace. We have a clear ambition to be the leading global provider of risk solutions to our customers, and we know what it takes to achieve this, consistent underwriting and risk appetite, a clear focus on the customer along with their current and future needs. We have the focus on the future and opportunities that exist or are yet to be created. We will focus on where we can be successful and not try to be all solutions to all customers. Entering new products and segments where we can lead, as well as take decisions to reduce exposures as and when needed, is critical.
We have delivered on what we set out to do three years ago, and we are well-positioned to take our commercial insurance business to the next level. Thank you, and I look forward to questions later today.
As I walked up there, Kristof said, "Break a leg." Maybe just before I get started and go through a large sea of numbers, I wanted to make a couple of comments on Make the Difference. Together with my colleagues on the ExCo, I've had the privilege of engaging with Make the Difference through about six different generations. Maybe touching on 25- 30 different topics. I've really enjoyed, again, listening to the team today. Verity's story about leaving school three years ago, I guess it reminded me of something. I can't remember leaving school anymore. I do remember leaving Glasgow to start my first proper job in London. I was working for a relatively well-known financial services company. One of its claims to fame was that one of the clients was the Queen. I was really proud.
I moved to London to start work, and I guess as employees, they give you something that they think would be useful. In those days, it wasn't a mobile phone, it wasn't a laptop, but it was a bag. I had a bag with the name of the company on the side of it, the initials. I start the job, and then the holidays, Christmas comes around. I stuffed the bag full of my stuff for the holidays, head back home, and spend Christmas and New Year with my friends before coming back. I still have at least one friend in Glasgow who thinks my first job was for a sports bag manufacturer. Good afternoon, everyone. I'm all that stands between you and the Q&A and eventual freedom from the day. It really doesn't seem like three years since we last did this.
I wonder if the next three will be quite as fast. This morning you heard from Mario on the plans that we have, the priorities for the next three years. You heard from Kristof on the efforts that we're undertaking to improve the efficiency of the group and in particular operations. Then you heard from Conny, Giovanni and Make the Difference team on something that at least here, I think would have sounded quite different. You just heard from Jim. As Jim pointed out to me in the break, my fellow mother tongue English speaker. He talked about commercial and the ways that we can improve performance in commercial, and by commercial I mean improve commercial performance, commercial with a large C. My job is to translate all of this into some numbers.
If you've seen these presentations before, you're not going to be surprised by what's about to follow. I'm delighted to stand here today and confirm something that you already know. We've exceeded the targets that we set back in 2016 each and every time we presented them. That's not going to change in February of next year. That's not the main reason why we're here. We've got new targets for the next three-year period. They all represent a pretty significant level of increase in the ambition that we have for the entire organization. We left the ROE target. The construction's the same, so the number has changed. Those of 14% and increasing over the next three years. Something new for us. A compound organic EPS growth target and the earnings growth target of 5%.
I think many of you know already that we've been working on this for most of the year. The difficult part is not the financial targets. The difficult part is working out where you want to be, in particular, how we're going to get there. On productivity, you heard earlier from Mario about how we believe we've delivered on an industry-leading simplification program, but we're not announcing a new cost savings target today. Cost discipline, though, does remain a key focus area for the group, whether it's driven by customer expectations of value or just by simple need to be competitive in the markets that we operate in. None of these forces have changed, and none of them are likely to change in the near future either. What has changed is I think we've demonstrated that you can achieve cost reduction and simplify the organization at the same time.
This is going to continue. We expect a combination of growth in the business together with further simplification efforts, as outlined by Kristof and by some other things that I'll mention in a second, will lead to a further improvement in the OUE ratio of about one to two points. Capital allocation. Over the past three years, we've announced a range of transactions aimed at extracting capital from non-core or other businesses. Things such as Morocco, Taiwan, South Africa, disposals of non-core portfolios such as the legacy U.K. employers' liability book earlier this year. The first of these we announced back in June of 2016. The most recent of these we closed last month. This is a process that we run internally that is absolutely going to continue.
We also take routine capital allocations decisions every day in the business, deciding which areas to grow, which areas not to grow, contract even. Again, that will continue over the coming years, and that will further support improvements in the group's returns. Cash generation. Financially, Zurich's USP. There's no one who can match this at this scale. The business model is highly cash generative by design, and we expect further improvement in the earnings to feed through into increased levels of cash generation, which will also continue to support the investments that we need to make, some of the things you heard about today, as well as the attractive dividend policy. On dividends, we know why you own the shares. There's no change to the dividend policy that we set out three years ago. Dividends will be based on sustainable growth, approximate payout ratio of its 75%.
As you know, as the dividend rises, the higher dividend becomes the floor for the following year. You already saw at the first half that we're on track to achieve all the goals that we set out, and I can reconfirm today that we expect to exceed all of the commitments that we made back in 2016. Today is not really about the past, and all of our effort is really directed at the future. There are a few highlights that I'd like to mention. On ROE, again, you saw the results, and while we don't expect to quite replicate that in the second half, I do expect the second half to confirm that we're not very far away from our targets for the next three years. The most significant factor behind this has been the reduction in the combined ratio, eight points since 2015.
It's more than a profit improvement story. You've seen a truly excellent growth from the life business. You've seen growth from Farmers, and of course, a lot of what we've done over the course of the last three years has been supported by reductions in our direct expense base. Capital. Our capitalization is very strong. We're above all the relevant capital thresholds, whether it's our own internal Z-ECM metric, external measures such as SST or S&P. In fact, the latter recently affirmed a AA- rating, but moved the outlook from stable to positive. Cash. I mentioned earlier, our businesses generate very high cash payout ratios by design. We were just a shade beneath the three-year target at the 13-month point. We'll clearly be above by the end of the year.
Keep in mind that this is after the impact of the restructuring costs that we've borne over the course of the last three years. Expenses. In my experience, there are several possible responses to an expense reduction program. Number one, suggest savings that someone else can make. Number two, offer reductions in expenses in your more profitable business with an even greater reduction in operating profit. Warn of the eminent return of the Four Horsemen of the Apocalypse. Alternatively, actually save money, cut costs. Three years ago, we committed to reduce the cost base by about 15%. If you zoom in closely and you look at the cost cut as a proportion of the addressable cost base, it's much higher than 15%.
On the chart, Richard and I had an interesting discussion with our head of planning and performance management, Nick Burnet, about quite how far we'd extend that slightly wiggly line at the end of the cost bar into next year. This was the compromise position that we adopted in the end. This was something that was simple in concept, but it's really difficult to do. I think it'd be fair to say back in November 2016 that we didn't know everywhere that this was going to come from. I'm really grateful to my colleagues for working with me on what were frequently unreasonable requests, and looking for the ways that we could actually achieve this goal rather than to offer me one of the first three alternatives that I outlined earlier in my comments. Every single part of the Zurich Insurance Group has contributed: country, region, center, group.
Richard and the rest of the IR team, who do such a fantastic job at getting us ready for these events, suggested to me that I could say, "I am thrilled to talk to you about new targets." Despite suggestions to the contrary, I do speak English. I do understand what thrilled means, but thrilled has never described my state of mind, ever. If you're following this on the transcript that's available after the event, my apologies in advance. However, today's the easy part. Tomorrow's about delivery. The only thing that comes to my mind is the responsibility of living up to the commitments that we make today for the next three years, just as we have for the last three. Anyway, I'm thrilled to talk you through our ambition for the next cycle.
Firstly, we target an ROE, as I mentioned earlier, in excess of 14% and rising over that three-year period. In the past three years, we've undertaken a range of measures to improve the quality of earnings, and we're confident we can further grow our profitable business justifying a 2% target increase. Which as you all know, based on current performance, is not really a 2% increase. Secondly, we'll target cash remittances in excess of $11.5 billion over the course of the next three years. $2 billion increase, roughly half comes from the absence of the more exceptional level of restructuring you've seen from us over the course of the last three years, and the other half from the plan that we've been describing today. Thirdly, we're introducing this EPS growth target that I mentioned earlier, 5% per annum. It's an organic target. It doesn't include the impact of capital deployment.
We certainly hope that over the course of the next three years, opportunities will arise, but we can't guarantee them, and therefore we have not yet included them. Lastly, I think as you'd expect, we'll continue to manage the balance sheet in a cautious and conservative manner, and continue to target a group capital position between this 100% and 120% of Z-ECM. 100% being roughly equivalent to AA on the rating scales. I didn't invent ROE walks, but I don't remember the last time I gave a presentation that didn't have one in it. At the first half, we shared with you a result for the first year, where the equivalent number was 15%.
I know that you understand this, but I can imagine other people might think, "Well, it doesn't seem like the most ambitious target." There are obviously a number of factors that you have to consider when you look at the 15%, not least of which, a relatively benign first half for natural catastrophes and for weather. We had strong performance in equity markets through in hedge funds, and we pay all the dividend at the end of Q1. I think if you take all of that out, probably the ROE benefits by about one and a half points. That gives you a sense of what we see as the real scale of improvement required. Turning to the future. Consistent with what you saw from us last time, we anticipate that the roll-up of capital due to retained earnings is a drag on the ROE.
It gives us flexibility, it gives us options for the future. For the time being, mathematically, it's a negative in this picture. It's not a statement of intent. It's just how it is to begin with. We've also accounted for the negative yield environment. When we set the starting point for the three-year period last day, and by luck, judgment, I don't know what combination of the two, we picked the low point in the yield cycle. I don't know that that'll be true today. It's a highly uncertain part of the model. I think as you know, to some degree, the business is self-rating. If we do see a further fall or fall again in interest rates, the issue is I can't guarantee that this happens with sufficient speed that that works in every single reporting period.
The most important thing I can say is that we're not geared to this risk. If you like this risk, you're in the wrong meeting. Fortunately, there are a number of levers that we have at our disposal to counteract this. Profitable business growth. A combination of some of the things you've heard from Giovanni, Conny, and Jim through the course of today also includes the benefit of two of the more recent acquisitions where you haven't really seen the impact yet. OnePath and Adira. Worth saying that the growth is not some fantasy where we grow at higher levels than the market at the same level of profitability. This is really looking at our businesses and asking them to grow at current market rates. It's very differentiated depending on where the business is.
It's not risk-free, but I think it's been a long time since we've been in a better position to deliver this. Productivity, we expect we'll deliver about 1- 1.5 points of ROE compared to the OUE commentary you heard earlier from Kristof, which covers part of the cost base and the things that the rest of us will do on the remainder. It's mainly driven by expense efficiency, some targeted cost reduction, but really fixed cost leverage as the business grows. We'll continue to focus on underwriting the portfolio quality. In particular, improvements from the recent price increases can be expected to add about 1- 1.5 points, while a further focus on capital allocation, so us moving or reflecting our preferences internally, could add about another 0.5 points to the ROE.
It's possible that in this view, the pricing outlook is a bit conservative. We've still got to deliver it yet, so seems appropriate to be cautious. There's nothing in here for terms and conditions. While our view into 2020 is more optimistic than it would have been earlier in the year, we haven't extrapolated beyond 2020. Combining all of these factors brings us towards an overall ROE of around 15% by 2022. Over the past few years, if you've been to these events, you'll certainly have heard us talk about what we're doing around reallocating capital, usually in the context of acquisitions and disposals. You've also heard how we've reshaped the P&C portfolio, particularly in regards longer tail lines of business. I'm going to spend a wee bit of time on some of these topics, and in particular, how they've impacted ROE for us.
Commercial lines business consumes just over twice as much capital per unit of premium or risk as the retail business, driven by the fact it's more volatile, has higher levels of investment risk because of the longer duration typically, but it's a fact. Since 2016, as we've managed internally the capital allocation, we've released about $1.7 billion of capital from commercial, while we've added about $0.5 billion of capital to retail support growth there. Over the next three years, I still expect higher levels of growth from retail than commercial. In fact, as you've heard from Jim, the continuing focus on profitability means that the growth in commercial is more likely to come from improved rates than from growth and underlying exposure. The combination of growth from retail and further improvements in profitability in commercial will obviously support further improvements in the ROE.
We place a high value in having as much access as possible to the risks that offer the better risk-adjusted returns. At this stage, as I mentioned earlier, retail is probably still the choice area. It's worth pointing out that we're not capital constrained, and we can take advantage of both as and when the opportunities arise. I like our life business. I'd love to claim that I was part of the decision a decade ago that set the group on the path to what it achieves here. I will say our decision, though, because the person who took the decision is in the room. We've been successfully growing protection business in all regions, and this remains a key priority for the group. The right-hand chart shows the IRR for protection unit link, traditional UC other things, how these compare to the different products.
If I take the scale off the x-axis or the y-axis rather, I don't think there's anything surprising about the relative positioning. It's probably roughly where you expect it to be. Maybe not the quantum. Maybe the quantum is a bit higher than you might have seen elsewhere. I think the kicker, though, is the x-axis. I'm not going to claim that this is unique. There aren't many that look like this, especially if you're truly market consistent about the capital elements of these IRR calculations. I think if you measure our business, our life business against the entire life market, we're far from the largest. If you measure us against the market that we choose to focus on, the picture is entirely different. I won't say much about traditional other than it's not a preferred risk for us. The Swiss capital requirements are punitive. I'm not complaining.
Our local teams have worked very well, very hard with our distribution partners to offer what we see as more sustainable alternatives to others and their clients here. There'll be no change. Overall, the average IRR is above 15%, and it's one of the reasons why we're very happy to grow it organically and inorganically. I mentioned the cost savings plans earlier. I think when you look at our financial statements, it helps to remember that the numbers in the financial statements move in a broadly similar way. Here we're talking about direct expenses. It's the real hard cash expense. It can differ a bit from what you end up with in the P&L because of things like capitalization and amortization.
The differences are so small that when you compare what you get in the financials to what you see here, there is no material difference. Within our definition, we include the expenses that sit within the loss reserve line. Just be aware of that. They're further influenced by M&A, which of course has added, as you can see here, substantially to the expense base as we've acquired businesses that we think generate attractive returns for investors. I think after the efforts of the last three years, it's really tempting to sit back and admire the progress. The only problem is that the end of this current three-year period happens to coincide with the start of the next three-year period. There's no weekend in between. In preparation of today, we've been through planning. Our ask of the business is as follows.
For a few, it's a relatively small group, further targeted expense reduction. They're just not yet where they need to be. For most, marginal cost growth only. It allows us to seize the benefits of operational leverage and gain efficiency. For some, additional investment in support of some of the key strategic priorities, and you've seen those things in these presentations already today. For me and for the rest of the corporate center, you work with what you have. There's no new money, and we expect that over the course of the next three years, the corporate center, relative to the rest of the group, will shrink further. This is an industry that offers tons of scope for efficiency.
The need for cost reduction is not going away, and even if the expense discipline doesn't take care of itself, I think it's far more ingrained in the organization than it was at the start of this journey. I'm confident we can deliver further efficiencies, allowing us to free up additional capacity to invest in other new propositions. That includes doing things that will emerge over the next three years that we haven't even planned for today. Kristof's presentation not only outlined the progress that he and the ops team have delivered, but it also shows there are lots of opportunities to further improve efficiency. Looking forward, the pricing conditions, the restored profitability and commercial make me confident we'll see net earned premiums grow. That means that, in combination with the efficiency savings, allows us to be confident about a reduction in the OUE ratio.
We're looking for about a 1%-2% reduction to bring it down to the 12%-13% range. Having spoken so much about future returns and productivity gains, it's really important we don't forget about core technical skills. You've heard lots of that from all of the presentations that you've heard already today. We could save as much money as we like, but if we can't get this right, you know what happens. I was going to say we. I'm not sure if it's okay, Jim, if I say we. We have worked really hard over the past three years. I want to give credit to Jim, Sierra, everyone in commercial and all of the country commercial leadership teams who've worked tirelessly to deliver a large part of what you see here in this performance.
It's not as if the team have been receiving bouquets along the way. It's not done yet, but at least they can continue with a bit of a tailwind and the confidence that comes from seeing your hard work start to pay off. That tailwind, combined with the changes that we know we need to make, create a very positive outlook for the business. Having said that, though, it's not all days of wine and roses. This year, just as it's been in each of the last three years, we need to address risks in the current portfolio. In recent years, that's been commercial auto, it's been construction liability, it's been financial lines, it's been liability generally. This year, as Jim mentioned, it's been a ton of credit.
I can't promise that we'll always get this thing right, and it would probably be suspicious if we did always get it right. We're investing heavily in underwriting to make sure that we stay on the front foot on this topic. For those of you who were at last year's Investor Day, you might remember my closing remarks on capital allocation. Improving capital allocation in our core business is amongst our highest priorities. We pay very close attention to how we use the capital. Whenever we can, we look to release capital from businesses that isn't doing the things that we set out to do. We have specialist teams, and their only job is to take over problems and fix them.
The decision to exit remains with business leadership, but once the decision is made, we have a team that comes in, they take over day-to-day management, and they deliver the exit. It insulates the ongoing business from the performance challenges and the other distractions that comes from this. I was going to make an analogy here to an old dog story. I'm always surprised by how many animal lovers come out when I tell my old dog story, so I'm going to skip that. Over the past three years, we've released $ 2 billion of capital from divestments between 2016 and 2018. Reinsurance has also played an important role. It allows us to rate and retain profitable business while optimizing capital efficiency. It's one of the areas where the Zurich of 2019 is and the Zurich of 2022 will be completely changed from the Zurich of 2015.
Almost all of that capital has been reinvested to strengthen our business. Over the course of the last three years, this aspect of capital reallocation has added 70 basis points to the ROE. If you break it apart, perhaps the impact of disposals is not quite as significant as the impact of acquisitions. Without one, we would not have had the other. It's not only about capital and earnings generation, it's also about being able to convert this stuff into cash. We've got a particularly strong track record in this regard. We've already met, I just want to repeat, we have already met our 2017, 2019 target. If you look back over the course of the last three years, after-tax earnings, capital generation, cash remittance, it's pretty much the same number. Something in the mid billion range.
We need to get used to a slightly higher number in the future, but it reflects the simple, short tail cash generative nature of our business. The P&C business benefits from a global diversified footprint. We're more towards the shorter tail lines now. Life remittances are supported by that shorter payback period. I don't need to tell you how Farmers works. You all know how Farmers works. Key message here is that you can expect to see continued strong underlying conversion of earnings into cash, well in excess of the dividend. Which brings me to the next slide. I know that this slide is as important to you as it is to me. For me, this slide never gets old. As Mario showed in his presentation, we provided shareholders, you, with an attractive level of return with a significant part of that coming through dividends.
Over the three years, 2017, 2018, 2019, we've paid about $9 billion of dividends and other capital returns, which is about 19% of our average market cap over the period. Dividend has grown stably about 6% in line with dividend policy. As we have in the past, we will in the future continue to look through one-off items, both positive and negative, to grow the dividend in line with our view of sustainable earnings. Deliver a payout ratio of about 75% of net income to our shareholders. There's just a couple of things I want to reiterate at the very end. You've heard me saying this before, and I'll say it again. Improving capital allocation is one of the highest priorities for the Zurich finance function.
We will do everything we can to support Mario and all of the CEOs in the group to flexibly deploy capital to meet the solutions that our customers need, and to deliver the returns that our shareholders expect. Just as our last financial plan was really important in delivering the foundation for this one, there are many areas here where we're investing for the future. The sustainability topics, the customer experience, millennial and Gen Z, relevant offerings, mid-market, accident and health and commercial. These areas share two things in common. Strategically, they're very important, but I don't expect them to contribute anything other than expenses for the next three years. The entire team has worked on preparation for today for the best part of the last 10 and a half months. Mario has set the direction and maintained the tempo.
My team, together with Giovanni's and Kristof's, have developed targets. Our colleagues, including Kathleen and Alison, have worked on taking the outline and turning it into a plan that we can actually execute. We've delivered more, I think, in the last three years than I think almost any of us anticipated. That was then. This is now. We've raised the bar over the last three years, and we intend to do exactly the same thing for the next three years. Richard.
Thank you, George. If I could ask you to stay on stage, and if I can ask Mario and Jim to join you. We'll come to the last Q&A session of the day.
Thank you. You guys are way here.
I'm back there.
We grabbed you.
Who would like the first question? Farooq on the right.
Hi. Thanks. Farooq Hanif from Credit Suisse. Just two questions. I remember in Kathleen Savio's presentation last time we met, there was this quite ambitious target for what you define as Commercial with big C, combined ratio in the U.S., in U.S. Commercial. Just wondered what the progress was. I think you said it hasn't been great so far because of investment, but just what you're allowing for, in terms of those shift to middle market in the U.S. in your numbers. Secondly, could you just clarify again what you meant by the inclusion of the pricing assumptions that you've put into that ROE walk? I think you suggested it was up to 2020. That wasn't quite clear what you've assumed for pricing, to the 15% indicative number. Thank you.
On the first piece, go back to the investor update we had last December. Kathleen presented her ambition for commercial in the U.S. We've integrated that into what you see here today. There's no inconsistency between now and in fact, we already talked, and Kathleen mentioned last year that mid-market was a key priority for us. I think the challenge we know we have on mid-market is it'll take some time to build the foundation required to serve that market really well. That's why I made the comment that we don't have huge expectations of that being a substantial contributor. Kathleen's three-point improvement on the combined ratio in the U.S. is in that walk there today. On the pricing expectation, we struck the basis for this. We typically do the planning August, September.
You can assume that the underlyings more or less reflect the environment that we saw then. I made the comment in the remarks that from a pricing perspective, we've assumed a rate environment that is maybe slightly more conservative than the one that you see today, because pricing has still moved up again in October and November. We've assumed it steps down on a written basis next year. A reasonably significant step down. Then we assume at the end of 2020 that we're more in a neutral environment versus loss cost. There is a significant benefit baked in here for that margin improvement that we think comes. It's probably a bit more conservative than the market currently delivers. We've stepped it down for 2020.
Peter over here.
Thanks a lot. Obviously done remarkably well in achieving all of your key targets and had to look very hard to find anything that didn't score absolutely full marks. If I look back three years ago, I guess one of the things you were looking at was reducing the volatility of crop insurance. Maybe this year isn't looking the best for that. Is that bad luck? Is there anything more you can do there? I guess another area you were focusing on was life in force, and you haven't given an outlook for earnings. I'm wondering whether there's a few words you can say on a sort of update on that. If I'm allowed a second question, last week, we also touched sort of briefly on the capital framework. It probably wasn't the right forum to discuss there.
Maybe this is a slightly better forum, but I'm just wondering if there's any sort of hints you can give in terms of if you were to make any reviews of the framework, what you might like to see that might help you better manage the business. Is there anything that you would like to see in that? I may be pushing my luck, but give it a go.
Okay. On crop, I think it would be really greedy to complain about the performance of crop for the last several years. I mean, you're absolutely right. This is going to be one of the years where we pay some back. I mean, net, the performance of crop has been a significant positive contributor to the group. I mean, Kathleen and the team, Kathleen was the sponsor of the transaction. A large part of what gave us the confidence to do that was the view of the team that they could take the technology that they knew they could apply, and rather than give the benefits of that to 75% who are other people, we could have the whole thing. Next year, just to make sure everyone's got the same knowledge base. It will be a tougher year.
We already know we have preventive planting costs in the results. We don't yet know the outcome for the yield and revenue. There's no signs that something particularly significant is happening there, but we just don't know at this stage. For us, rather than see a combined ratio we'd normally expect to see in the mid-90s, we're going to be in the low-ish three digits. Something like a seven or eight point turnaround from where we've been before. Not to correct you, but I don't think we ever set out with a crop volatility goal.
We did set out with a volatility goal overall. Crop or no crop this year, we'll deliver on that too. On the life side of things, I made a few comments in the introduction to the earnings, one at the earnings call, but the update last week. Really that was just to make the point that I think from where we stand today, given where interest rates are, I expect P&C to do more of the running for the next three years. Life has a bit more headwind. I don't think it's specific to us. We're not troubled. I think we're happy with where we are. Just looking at the dynamics, that's our view around life. We haven't set formal targets around any of the subsets of the business, to be honest. Then the capital thing at the end.
One of the joys and one of the impositions of working in insurance is that everyone can find the capital model that they like because they're all there somewhere. The problem is we have to actually operate under many of them at the same time. You need to be really careful that you change one without really careful consideration of what the unintended consequences will be. We have a new chief risk officer. He's been in place now for six weeks, give or take. We'll take a bit more time to look at this more carefully. One of the benefits of our risk model is that that's helped determine that life portfolio I showed you earlier. You need to be really careful that you don't disturb that as you look at how the business responds to the risk model. We are looking at it now.
Perhaps over there, James Shuck, on the right-hand side. About right.
Thanks. James Shuck from Citi. Three from my side, please. George, just going back to your ROE walk. If I grow the EPS at 5% out to 2022, I don't get a 15% ROE. I get something that's less than that. Obviously, you've allowed for the growth in the equity base there. Just help me, either my math is wrong or I'm missing something. Kind of linked to that, I can see the productivity gains, I can see the business growth and portfolio quality. Obviously, when you look at your businesses on a country-by-country basis, there are some countries that are making good returns and ones that are making bad returns. I think we've spoke about in the past the difficulties in allocating capital and equities and seeing where the low ROE countries are.
Where's the actual improvement in some of those underperforming businesses as opposed to productivity gains and business growth? Is there actual businesses that can be turned around? That's the first question. Secondly, just clarify restructuring costs. You've given guidance for the current year. Are there any restructuring costs to be included out to 2022 and hence, still dragging on that EPS CAGR? Final question, Jim, since we've got you here, a lot happening on the liability claims outlook. We speak about it often, did so on the recent earnings results. I'm just keen to get your view on what's happening, kind of large commercial, small commercial, the outlook there for the kind of claims environment over the medium term. Is it a catastrophe that's going to get worse? Do you think it'll get better?
I understand the Zurich book is better positioned, what does that mean for your mix of business relative to the target you had? You had the property and the casualty and the specialty book, your ability to rebalance that. At what stage will you start to go back into liability when the pricing is adequate? Thank you.
On the first one, on the comparison that you've made of your model to this, it's really hard to do it from the stage, James. A number of people have looked at this from our advisor side, and they also have slightly different outcomes. Obviously, the starting point is extremely important. I think if we chat together more directly, it'll be easy to find where we might have different views or where we have differences. On that capital reallocation topic, and I mentioned earlier that over the last three years, through a combination of M&A and some of the non-core activity, we added about seven-tenths of a point. There are some things in there that you cannot repeat because we've done them.
Having said that, I'd love to tell you that this thing just runs off and it eventually disappears, so there's no issues in the capital allocation. Of course, that's not true. Some of the risks that we take just don't turn out the way we hope, and then we have new things to deal with. I think one concrete example here, you know that we have a large quarter share on our property risk in North America. That's really been our view of price adequacy versus the risk that we were taking on that product. We have the ability to essentially retain more of that. It will require us to buy a bit more cat cover to maintain the cat levels that you're familiar with.
That'd be one obvious example where if we want to take more risks because we believe pricing is more adequate, that's an option for us. Likely an option that over the course of the next three years, we'll probably pull on either in part or in whole, I think.
On the claims. We definitely track the claims inflation that we see by line of business by country. A lot of the conversations that we've heard and talked about over the break, over lunch over the last couple of weeks, what we're talking about is primarily in the United States. What we've done, and as I explained, the lines of businesses that get the most attention are the motor and the general liability, which we've reduced by 31% in the United States. We've reduced the motor portfolio globally. We're obviously watching it. We see it. When we look at our performance in terms of rate, our performance in terms of policy and policy structure, we feel that we've been managing it well.
Jonny Urwin, left-hand side.
Thank you. Jonny Urwin, UBS. I think we spent most of the last two years being corrected by Richard that the 95%, 96% combined ratio is an ambition, not a target. Question, is the 15% ROE an ambition or a target?
The target, Jonny, is for an ROE that is more than 14 and rising. Within that, we have ambitions.
Will Hawkins, there in the middle.
Thank you. I'm William Hawkins from KBW. Can you just remind me, we've heard a lot on technology. Just to put context, what is the size of your IT budget as you currently measure it, and how do you break that down between your investments just to keep the current business ticking over and where you're investing in change? Then secondly, slightly more kind of conceptually, again, take on board everything you've said. The implication for your technology changes within the context of the group, it's sort of gradual over time. You've baked all this into your smooth change in numbers. Are there any circumstances in which you can envisage saying, "Actually, we need to make a step change here. The pace of technology and the market overall is accelerating, so we need to do something which is big, either organically or inorganically"?
Again, everything you said here implies the answer is no, but I'm just wondering if there are any circumstances you can envisage.
I was going to let the person who spends all the money tell you how much he spends.
Micro discovery. I thought I heard 17.
You spent about.
Yeah. Okay. We spent about CHF 2 billion on IT. About a third of that is change. That's still one of the challenges. It also goes back to how much we spend on the back ends. We want to change that mix, clearly going forward. In terms of step changes, you will see an increase in some of the areas where we will continue to invest and up the investments. Security is one of them. We made a commitment to our customers that we need to stand by. We do acquire. Things like ZCAM bring new technology into our environment. I think those are also things that you should think about when you think about the overall investments that we make there.
Johnny Vo on the end.
Johnny Vo from Goldman Sachs. In case IFRS 17 gets implemented in 2021, what happens to your target, or at the end of 2021 or the start of 2022?
Yeah. Maybe. I'm not sure. You'll have a better view than I will. That's the first question. The second question is just in terms of, again, capital allocation. I guess in terms of remittances, if I take out all the dividends, there's probably north of CHF 1 billion left over. Is that what is limited to M&A and potential further capital returns? Is there a preference between M&A and further capital returns? Finally, in terms of the life business, if I look at your Z-ECM ratio, obviously it's been impacted by a lot of traditional life business sitting on your books. Is that something that you would consider looking to mitigate by disposal or potentially selling part of the back book to reduce sensitivity? Thank you.
Okay. On each of these, maybe do it in reverse order. I think on the last one, on the life back books, if it's something that makes sense from a strategic perspective, is open to us to do one that doesn't cause issues for our partners on the distribution side, which actually solve the issues. We're open to all of those solutions. We've done some of them already. If you look back at what we did with Annuity in the U.K., we did this transaction with Rothesay about three years ago. We've done subsequent follow-on templated transactions with Rothesay just to keep removing a risk that doesn't fit our risk appetite, and from a capital perspective is pretty capital intense under the Swiss framework. If we can do that, we would.
I'd say that maybe in some markets it's a higher priority than in others, but actually trying to grow the business, create the right foundation, is probably the more important goal that we have. Remind me what the first question again was, Johnny?
IFRS .
IFRS 17. I managed to forget that. What happens if IFRS 17 suddenly accelerates? Let's just say that that's a hypothetical that seems so far on the tail. We have the benefit that just given the products we have, we are at an advanced state of preparation. I said to someone earlier, we will start running IFRS 17 in production as of next year. If for some reason it appears in the following year, we're ready. There are some things that still need to be ironed out, but we're ready. I think the general view of the industry is that another year's delay would be beneficial to allow for a properly planned adoption of all of the different aspects. We've had it both in the ExCo and in the board already, some of the high level numbers.
All I can tell you is that you're going to have to get used to an entirely different world when this thing arrives. What was the second question?
Just in terms of capital return, if you look at remittances.
Yeah. You're right on the numbers. I think, typically all things being equal, we generate about $1 billion more every year. If you looked at the walk, that accumulation was that first drop in the walk with the headwinds. That's something that gives us the opportunity to do things that may come along. We would obviously prefer to grow the business in a way that would support higher dividends in future for shareholders, and that would be the highest priority.
Okay. Perhaps we can come down here to Nick Holmes.
Can I say that by no, you have no realize I can't cope with three questions?
Don't worry.
One is IFRS 17 questions.
Nick Holmes at Soc Gen. First question for Jim. In big picture terms, how important are low and falling bond yields this year to driving the commercial P&C pricing? How important in 2020 will bond yields be, do you think, for pricing? Second question is on the expense ratio. Just wondered what your thoughts are. The expense ratio, even after the OUE reduction, is still higher than peers. A lot of this is business mix, obviously. Is there more that could potentially come in terms of expense reduction, even theoretically beyond the OUE reduction that you're looking at?
Why do the OUE thing first, and then between us, we'll do the other topic. On the OUE, I think I said in the comments that it's hard to imagine that at the end of the next three years, we go, "All done. Nothing to see, move on." There's a revolution in technology taking place. Our customers expect us to take advantage of it. Mario talked in his presentation actually about, as a critical issue in trying to look after the communities that we're part of, trying to make sure that people are trained. We help people develop the skills to confront some of these new challenges. I don't think it stops here. Where it goes to, today, this is as far as we're prepared to go on predictions.
I think, first part of your question was about 2019. We're no longer pricing 2019 risk for the most part. We're into 2020. I think when you look at how we decide on pricing, the overall strategy in terms of the consumption of capital, the long-tail investment availability, the short-tail business, that factors in into the larger picture. I really in the past, I would say, if you look at the last year, it's about loss ratio and risk selection. It hasn't, in terms of the pricing, does it factor into the modeling? Yes. Is that driving our decision in terms of pricing or risk selection or portfolio mix? No.
Nick, also, I'm not truly convinced that we have a cost disadvantage on commercial. We've been benchmarking, for example, carefully the U.S. business against the U.S. players. Typically there, we have a cost advantage over practically all the peers. If you talk broadly about our total property and casualty cost position, that could be a different story also because we have a heavy cost component in the low claims, in low loss ratio business that we write in South America. That is where the business mix has an impact. Honestly, I was trying to think back to Kathleen's numbers in U.S. It's not immediate to me that we have any cost disadvantage on commercial with any of the peers.
I can remember a very long time ago, I think it was 2004, when Zurich had the lowest expense ratio, in just absolute terms, not adjusted for business mix or anything. The lowest expense ratio of all of the European peers. Now if you look, even after the OUE thing, you still look a little bit high, and I just wondered, but your answer is that it's business mix, essentially.
Can I also point out that in 2014, we changed the way we calculate cost ratio and added two points to it?
Yes.
Just for the sake of.
No, Nick, we're not saying it's only business mix. We're saying we are committed to continue driving down the cost ratios. We're not saying it's just the business mix. We're just saying I think we are highly effective or productive in commercial. Even there, we're looking at ways, and Kathleen is committed to continue calming down cost inflation in U.S. Don't take it on the other opposite. We want to work on cost. We will work on cost. We will improve our cost efficiency further. It's not immediate to me that we're lagging behind on the commercial space to anyone else. Actually, whenever we compare ourselves on commercial, we typically conclude that we have a cost advantage to the others.
Press can go to Andrew Ritchie.
Hi. It's Andrew Ritchie from Autonomous. I think I've got one for each of you, I think, to make it easy. Simple one just for George to start with. I presume the capital intensity of commercial will fall as prices rise. You've referenced it to NEP, but if NEP's growing just because of price, not exposure, I'm guessing that falls. I presume the 90 is based on today's pricing, and if pricing's up six and maybe another six, then that could fall quite materially. Just clarify that. For Jim, I'm still a bit confused on what your ambition is in specialty at this point. I'm not sure also what you're including in specialty. I presume you're including professional lines in specialty, not in casualty. You're happy to grow specialty now apart from credit.
I think that's what you said, and maybe just clarify that you've got the capabilities, the underwriters in place for that. I had also a longer term picture. There's very few global commercial lines insurers with multinational global master capability. Maybe five, maybe it's less than five right now. Traditionally, they haven't had great pricing power, despite the fact you have to maintain vast networks of claims and regulatory people. You haven't had pricing power because of the power of the brokers and because of the impact of excess capacity. Is there real pricing power now? Can large global corporate multinational insurers now really make money, and can it make excess returns if there's so few of you that do it?
The final question for Mario, I guess you're going to revamp the remuneration structure, because I think you ramped it at the start of the last three-year plan. I'm assuming, will it be the same structure so there'll be a cash remittance target in there? BOPAT ROE would move from 12 to 14. Is it going to be fully aligned or are there any other quirks you're going to chuck in? Thanks.
Yes. To answer the first part of your question, what do we mean by specialties? Specialties includes Financial Lines, it includes Marine, it includes Political Risk, Trade Credit, Surety Accident Health. Your question on Professional Indemnity and that professional, that's what I look at as a subsection of the Financial Lines business. That would include Professional Indemnity for professionals, but also for financial institutions, et cetera. It's a very big mixture of lines of businesses. The Credit Lines and the Surety exposures, we definitely see a change in the marketplace, and so we think we're, as George said, we're not always right, but we certainly believe as we look forward that this is a line to either maintain or to reduce, regardless on the geographical exposure.
In financial lines, we made some significant portfolio changes with respect to lines of businesses that weren't performing well and haven't performed well for many carriers in the industry. Growing in the D&O space, which has historically been a good line of business, has performed quite poorly over the past three years. We didn't grow it. We do have the talent and expertise, and as the market is changing and the rate increases and improving terms that we're seeing, particularly in the United States, we're seeing it in the D&O marketplace. We're conservative, but we're ready and we're opportunistic to capture that market. We hear a lot about the marine portfolios and different carriers in the market, that's historically been a tough line of business. One that helps complement many of our other lines of businesses that we have with customers.
We do believe that A&H is an area that we will grow and continue to grow. The collection of lines that we call specialties, they're not always interlinked to each other, and so it'll be opportunistic, but we absolutely feel that we are well positioned in that space. We will continue to see how that progresses through the coming cycle. Your point on the large multinational business, you're correct. There are four, five, six carriers that have the network and the ability to service these customers. What we've seen is they've become challenging for a number of reasons. Number one, they have a much higher level of risk manage sophistication and risk management in terms of how they manage the risk and portfolios.
The vast majority are intermediated, and the brokers will put their best people on that to find the best terms and conditions in the market. I believe that a lot of carriers look at them, there's a prestige in some of the markets to write these lines of businesses. To access the broader portfolio, you need to help out the distribution in the tougher risks. You also have these companies have the ability to retain more risk. The more they retain and have the premium sitting in what would be more of the attritional layer, what's left that goes into the risk transfer market has more volatility. The question is, your question was, going forward, is this an area that we can make money?
If I were to look at and segment where we've seen the best in terms of rate increases, the best changes in program structures, the best deductibles, introduction of captives and risk sharing, it's been in that space. That is where we're seeing the significant changes. It's coming through in the large middle market, multi-country jurisdictions. I absolutely think that is the differentiator for us. I'm often asked, when you talk about middle market, you're going to grow and try and compete with a market with 35 carriers, and how are you doing it in the larger when you have a smaller? That to me is the area, the large multinational is an area that differentiates us, one that we've invested in.
I think that the customers, when I talk about service, and as opposed or in addition to the risk transfer, it's getting more and more difficult to operate a global organization in some of the changing geographical environments, regulatory environments, political environments. They rely upon their insurance partners more and more to help them navigate that space. I think, yes, it's an area we'll continue to invest and continue to lead in.
I have a yes myself as an answer. All targets are aligned with these targets year by year. They were in the three years before, and they will equally for the next three years, including the targets that Conny introduced and indicated on customers and brands.
Jon Hocking here in the middle.
Thank you. Is the middle market completely distinct from SME, or is there some overlap? That's the first question. Secondly, looking at the capital intensity slide that George put up, is this middle market business lower capital intensity than the rest of commercial? Does it depend? Finally, the slide that was put up showing the service and capability that you need for middle market, does the shape of the ROE look different for middle market? You're carrying more expenses but with low volatility returns. How should we think about that mix shift over the period? Thank you.
I can do two straight away. That'd be yes. Maybe also three. I think if you look at the broader middle market, it would have different characteristics, and that's part of why you see the effort on our part to deepen the footprint that we have and service that group more effectively. I think for the mid-market that we've ended up with today, it's not delivering that for us. That's why Kathleen and the team are making the changes that we talked about, or Jim talked about in the presentation.
Yeah, just in terms of where there's overlap, it's not a clear cutoff point. When does a company stop being an SME and become a middle market? When from a middle market to a corporate or a large one? It really often depends on lines of businesses. You look at, I could see a risk of a scaffolding company in New York City that has a small warehouse in Queens and five vehicles. That's a pretty small SME risk. When you start looking at the liability exposure, it changes a little bit. Really it's so hard to say. We try and say a turnover just as a general guideline, but it will vary by lines of businesses. The same is true at the upper end. When does it stop being a middle market and become a large corporate?
The conceptual division is SMEs are products where almost there is an automatic underwriting at the origin of the product. Middle market, there is an underwriting of the risk, and the policy can be written on the risk. On SMEs, that should be excluded. An SME which is outside of a product is not an SME. You can get very passionate, and you can spend a lot of time in these definitions, but intuitively, the concept is quite easy to grasp. Yes, sometimes we become very passionate about that.
Philip here.
Thank you. Vinit from Mediobanca. Just two questions, please then. Mario, I heard you loud and clear in the media call that you're not happy to present any guidances regarding combined ratio in this plan. I was very surprised because if anything, that would have been one of the strongest parts of this plan, because we've seen such an amazing combined U.S. commercial situation where claims inflation is where it is and pricing is still accelerating. I know we can see that credit is flowing down, so maybe a very low combined ratio area is slowing down. If you could help us a bit as to why this stance was taken in this target setting, or am I completely missing something in what has been communicated? That's the first question, really. Second question is for Jim as well.
I can see very clearly that the 31% general liability reduction has helped you better weather the current sort of claim severity in the U.S. Could you actually comment that, was there something more to it? In other words, the book as it was in 2016, was there some sectoral differences already when you came in, which would have said, hey, we anyways would have weathered this better? My experience has been it's not just some cutting back in premiums that lets any commercial carrier weather this kind of situation easily. If you could just comment on exposures as well. Thank you.
Sure. When we look at liability, what we're including is general liability, workers' comp, and motor, right? Generally is the three large. Over those three years, as I said, we've reduced both motor and the overall liability portfolio, and those numbers were based upon net earned premium. As we've seen some rate increases in these spaces in the accounts that we retain, we've also reduced the exposure even further. I'd say we look at it from a customer perspective as well. If we're a major carrier, a major supplier of a certain line of business for a customer, to leave them in a certain line, it's a lot easier to focus on a reinsurance or a reduced net position. I think workers' comp, we've definitely taken positions and changes in that portfolio.
I would say the motor and the general liability have been the largest. Outside of the United States, there's lots of large multinationals that have exposures in the United States, we've seen significant change in that portfolio as well, both on our underwriting, how we structure treaties and that. All of it has contributed to that reduction. When you look at that 31% that we talked in the United States, that's on NEP. The exposure's probably come down a little bit more.
Mario and I have agreed I'll answer the first question. It's not that we don't have combined ratios in our plans. We do. I think if you followed the company's commentary, if you followed my calls over the course of last year, I have to change tack slightly just about every single three months currently. There's no value in that. I think the team are more than happy to help you guys find the elements of the ROE walk that are combined ratio relevant and allow you to work out where you think the combined ratio will go. Our aspiration's about return on capital. That's the key driver for us.
Forgive me, but I would have given the same answer this morning, so I thought it's better to give another answer.
Okay, well, perhaps one last question from James Shuck.
Thank you. James Shuck from Citi. Large loss volatility. 13 points you showed on the slide. It had come down to five points. Was that in your budget? Is that what you were targeting to get to on five points? Are you happy with that being at five points on the commercial book? Do you want to take that down further? Secondly, there seems to be a little more confidence around European commercial rate outlook. The environment has been improving. Can you just comment on how sustainable you see that is and some of the drivers behind that? I hope my third question doesn't get forgotten again, I was just keen to know about the restructuring charges in 2022, please.
I'll do one and three, and you do two.
Okay.
On the what was the aspiration? We actually had an aspiration to reduce the large loss experience below the level that we currently see. As Mario mentioned earlier, we've tried to get away from it's not us, it's the large losses, as a constant excuse for why things don't work. We don't do that internally. We don't do it externally. We had an ambition, we have an ambition to try and take large losses down a bit more than today. On the restructuring, apologies to James for forgetting it last time. We've given guidance that we think that probably, given the size of the group and the activities we have, maybe CHF 100 million-CHF 200 million is a reasonable ongoing assumption around restructuring. The programs that we have here, I expect to be within that number. No change to restructuring guidance.
The rate increases that we've seen in the marketplace really began, I would say, towards the end of the first quarter of 2019 in any great consistency. We saw it first in the United States, we saw it first in the cat-exposed lines of businesses, and we've slowly seen that from quarter to quarter increase in the United States. We've seen it in the London market. The London market probably, sometime in the summer, started to show substantial consistent changes. Continental Europe is a different marketplace. The vast majority of the business, not just our business, but the business in the market, renews on January 1. It was this time last year, all of those accounts were renewing. We're in the middle of that process now. I'll talk to you in February and see how it all worked out.
The indications we have today are that the rates are increasing and holding in the large multinational risks, certainly across most of the European countries. I would say the market probably was in denial in the summer that it would happen. From the underwriting community, you talk about this market coming for years, and when it comes, it's really difficult because you're dealing with customers who don't want it to change, don't see why they're being impacted by the change. They don't believe if their broker's been bringing them up to date and preparing them, they don't believe it, so they want to get another broker to try and look at it, and it moves around markets, and so it's a very disruptive time.
The indications we're seeing are that the rate increases that we were seeing in the U.S. and here in the U.K. will be seen in the first quarter in Continental Europe. Follow?
I was just keen to understand the drivers of it a little bit, really. We sort of seen the reversal of globalization or more localization of capital. Why should German or French clients see rate increases just because there's been U.S. cat or Japanese cat, for example? What's happening on the claims side that's hardening the market?
I think that a lot of these companies are multinational companies, right? They don't live in their own market, and they're not able to purchase towers within typically in their local capacity. Markets around the world have benefited from a soft market. If you are a property risk in Argentina or in Australia, you weren't a better risk over the last 10 years. You just benefited from the global markets coming down. I think what we're seeing is that the reinsurance market, they've had certain experiences around the world across their portfolio, as have carriers. More and more it's being looked at as a global portfolio.
What I can say is what we're seeing in many of the European markets is a consistency of approach by what you referred to earlier as the top five or six carriers who have this experience and have this history. You do see some local carriers coming in who have never written the business before in that jurisdiction are willing to take it at expiring price without the experience. The customer, in my view, will win for a year or two until the same experience comes up. That's a possibility that we'll see in some of the European marketplaces. Generally, I think it's the global nature of the reinsurance markets, of the global treaties that people purchase, and having to look at it as more of a portfolio. We'll see in a couple months.
Okay, well, thank you very much, everybody. We'll leave the Q&A there. If you do have follow-up questions, obviously the IR team is available later today and obviously in the coming weeks. I'll pass it over to Mario if you want to make some closing remarks.
Guys, it's hard to say anything after this long day. Thank you so much for your support through the years. Thank you so much for the questions today, and please keep us awake with challenges, with questions over the next three years. Rest assured that we plan to have a very similar day in three years' time with very similar messages, and we count on all of you being there as we will be there. Thank you.