IFRS 17 at Zurich

An introductory guide for investors and analysts

September 27, 2022

Investor presentation

Zurich Insurance Group

GROUP

Key messages

No major impact given nature of our business

Shareholders' equity

impacts

Limited changes for P&C

Improved Life disclosures

Farmers largely unaffected

Cash and capital generation remain strong

© Zurich

Adoption of IFRS 17 not expected to significantly change the Group's earnings;

~75% of Group BOP is either unaffected or subject to the simplified approach (PAA)

Classification of risk adjustment and Contractual Service Margin (CSM) as liabilities, partially offset by other adjustments

P&C accounting will primarily be based on the PAA, with limited changes versus IFRS 4, bringing better comparability across lines of business

Overall earnings level remains largely unchanged. However, profit signatures may vary from IFRS 4. IFRS 17 will improve visibility on profit emergence

Farmers' fee business unaffected by IFRS 17; Farmers Life and Farmers Re will be treated consistently with the Group's Life and P&C businesses, respectively

No impact on cash remittances and SST ratio. No change to dividend policy

September 27, 2022

IFRS 17 at Zurich

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GROUP

Roadmap to IFRS 9 / 17 at Zurich

FY-22 IFRS 4 results reporting

HY-23 results:

FY-23 results:

(Discussion of IFRS 17 transition impacts)

1st full IFRS 17 reporting

full IFRS 17 reporting

Early communication with

analysts/investors

Investor day including

Q1-23 results: News release only

Early communication with

2023-25 financial

(FY-22 IFRS 17 financial

Q3-23 results: News

rating agencies

targets on IFRS 17 basis

information to follow shortly after)

release only

Q1-22

Q2-22

Q3-22

Q4-22

Q1-23

Q2-23

Q3-23

Q4-23

Q1-24

IFRS 17 parallel runs and transition balance sheet (Jan 1, 2022)

Auditor alignment / Peer alignment on KPIs

IFRS 17 financial planning

IFRS 17 financial planning

© Zurich

September 27, 2022

IFRS 17 at Zurich

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GROUP

Choice of measurement model based on qualitative considerations and eligibility assessment

APPROACH

GROUP'S GENERAL RULE:

EXCEPTIONS CONSIDERED BASED ON:

ELIGIBILITY ASSESSMENT:

P&C insurance

Life insurance2

PAA1

Used for ~99% of P&C GWP

BBA/VFA1

Used for ~75% of Life reserves and investment liabilities

  • Contract boundary
  • Management approach & KPIs
  • Current accounting practice and actuarial methods/tools
  • Materiality and operational considerations
  • Not needed for BBA approach (IFRS 17 default model)
  • Needed in order to adopt the simplified approach (PAA)

EXAMPLES

JAPAN P&C:

NORTH AMERICA P&C:

LATIN AMERICA LIFE:

AUSTRALIA LIFE:

PERSONAL ACCIDENT

WORKERS' COMP

SANTANDER JV PROTECTION

PROTECTION

BBA

PAA

PAA

BBA

© Zurich

  1. PAA: Premium Allocation Approach; BBA: Building Block Approach; VFA: Variable Fee Approach.
  2. Excluding Life investment contracts, which are accounted based on IFRS 9. A modification of the BBA approach (i.e., Variable Fee Approach, or VFA) is discussed in the Life section of this document.

September 27, 2022

IFRS 17 at Zurich

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GROUP

We have chosen options that reflect underlying economics and provide stability of earnings to the greatest extent possible

Stability of earnings

Operational simplification

Recognition of underlying economics

KEY ACCOUNTING CHOICES

RATIONALE

• Bottom-up approach: risk free rate plus illiquidity premium1

DISCOUNT RATES/

December 2021 forward curve used for historical years pre-2015 in P&C2

OCI3 OPTION

Disaggregation of impact of changes in discount rates between P&L and OCI3

RISK ADJUSTMENT

EQUITIES FVTPL4

LEVEL OF AGGREGATION

TRANSITION

APPROACH

  • Percentile approach, based on SST target level of ≥160%, with a periodical review of cost of capital
  • Disaggregation of impact of changes in risk adjustment for non-financial risk between P&L and OCI3
  • We will not use the option to designate equity securities at fair value through OCI3, with consequent impact on NIAS
  • Application of annual cohorts for traditional savings business (mainly in Continental Europe)
  • Fully retrospective approach for recent cohorts; modified retrospective approach preferred alternative
  • >80% of CSM based on retrospective approach, <20% on fair value approach

Optional exemption not applicable outside of the EU

1

Illiquidity premium not applied for onerous contracts.

Zurich©

2

December 2021 forward curve for pre-2014 claims for North America P&C. Depending on transition approach, different dates apply for certain Life portfolios.

4

Fair Value Through Profit and Loss.

3

Other Comprehensive Income.

September 27, 2022

IFRS 17 at Zurich

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Zurich Insurance Group AG published this content on 27 September 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 September 2022 05:20:02 UTC.