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Zurich Financial Services<br />
Switzerland/Insurance Analyser<br />
Zurich Financial Services (Accumulate)<br />
Accumulate<br />
Recommendation unchanged<br />
Share price: CHF<br />
closing price as of 07/05/2012<br />
Target price: CHF<br />
from Target Price: CHF<br />
Reuters/Bloomberg<br />
221.10<br />
260.00<br />
241.78<br />
ZURZn.S/ZURN VX<br />
Market capitalisation (CHFm) 32,587<br />
Current N° of shares (m) 147<br />
Free float 100%<br />
Daily avg. no. trad. sh. 12 mth 740,681<br />
Daily avg. trad. vol. 12 mth (m) 157<br />
Price high 12 mth (CHF) 227.90<br />
Price low 12 mth (CHF) 134.75<br />
Abs. perf. 1 mth 0.18%<br />
Abs. perf. 3 mth 3.60%<br />
Abs. perf. 12 mth 1.09%<br />
Key financials (USD) 12/11 12/12e 12/13e<br />
Life Gross premiums (m) 11,584 11,871 12,460<br />
Non-Life Gross prem.(m) 38,101 37,201 38,017<br />
Total Net Revenues (m) 51,792 62,583 66,878<br />
EBIT (m) 5,358 4,536 4,854<br />
Net Profit (adj.) (m) 3,801 3,843 4,309<br />
Shareholders Equity (m) 31,636 32,611 34,030<br />
ANAV (m) 6,114 6,551 7,432<br />
ROE (adj.) (%) 12.6 12.5 13.5<br />
Combined ratio (%) 99.7 98.6 97.3<br />
P/E (adj.) 8.2 9.2 8.2<br />
P/BV 1.0 1.1 1.0<br />
P/ANAV 5.1 5.4 4.8<br />
P/EbV 0.9 1.0 1.0<br />
Dividend Yield 7.6% 7.7% 7.6%<br />
EPS (adj.) 25.79 26.08 29.24<br />
BVPS 214.65 221.26 230.89<br />
ANAVPS 41.48 44.45 50.43<br />
EbVPS 233.97 233.97 233.97<br />
DPS 18.13 18.43 18.30<br />
220<br />
210<br />
200<br />
190<br />
180<br />
170<br />
160<br />
150<br />
140<br />
vvdsvdvsdy<br />
130<br />
Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12<br />
Source: Factset<br />
Shareholders:<br />
Analyst(s):<br />
ZURICH FINANCIAL SERVICES SMI (Rebased)<br />
Marco Cavalleri, Banca Akros<br />
marco.cavalleri@bancaakros.it<br />
+39 02 4344 4022<br />
Q1 12 preview<br />
The facts: the company is set to report its Q1 on May 10.<br />
Our analysis: we expect a strong growth from a year earlier on the back of lower<br />
frequency and severity of nat cat claims.<br />
Q1 12 estimates<br />
USD m<br />
Consensus<br />
Dow Junes<br />
Page 37 of 80 European Securities Network<br />
Please refer to important disclaimer on the last page<br />
Y/Y<br />
Ch%<br />
AKROS<br />
Y/Y<br />
Ch%<br />
BOP before tax 1,134 33% 1,186 40%<br />
o/w General insurance NA 601 118%<br />
o/w Global life NA 370 2%<br />
o/w Farmers NA 400 5%<br />
profit 1,032 62% 889 40%<br />
Sh. equity (*) 30,586 2% 31,103 3%<br />
BOP = business operating profit as stated, (*) incl. preferred shares<br />
General insurance Q1 10 Q1 11 Q1 12 E<br />
reported CR 99.0% 103.6% 96.2%<br />
reserve release 3.5% 3.8% 3.8%<br />
nat cat -2.8% -6.8% -2.0%<br />
large claims -6.6% -8.4% -8.0%<br />
= underlying CR 93.1% 92.2% 90.0%<br />
Source: company, DJ consensus and BANCA AKROS estimates<br />
Our forecasts, however, are quite conservative since they do not include the<br />
acquisition of Santander‟s operations in South America and Malaysia-based<br />
business yet: the management said at the FY11 CC that it would give more<br />
insights in these businesses‟ contribution after a more complete review of their<br />
accounts under IFRS. In early 2011, Zurich extended the partnership with<br />
Santander in LatAm, giving Zurich access to a banking network of 5,600 branches<br />
and additional 36 million customers in the region. Zurich, which already had large<br />
bancassurance operations with the Spanish bank, acquired 51% of a new entity<br />
set up to combine all the insurance operations of Santander in Brazil and other<br />
countries. The deal, finalised in late 2011, was expected to add USD 2bn of written<br />
premia (70% in protection products to be included in Zurich‟s global life business<br />
segment) and USD300m, before goodwill amortisation, on annual basis.<br />
The management will also disclose the final year-end solvency, expected to stand<br />
at 190% and in the 100%-110% range under the binding Swiss regime and the<br />
company‟s internal model respectively, including the impact from the acquisition of<br />
Santander and Malaysia. The review of the assumptions used to calculate the<br />
solvency under the Swiss regime by Finma, due to have been completed in April<br />
with a more conservative stance, is likely to reduce the ratio by 5-10 %-points, also<br />
lowering the guided proportion of 1.8x between SST (less conservative) and<br />
internal model (more conservative) - the Ceo said in the FY11 CC.<br />
Conclusion & Action: we keep Zurich among our buy conviction list in the sector,<br />
although more defensive names could be played in the short term to withstand the<br />
possible new escalation in the euro crisis due to both the number of political<br />
elections ahead and the collapsing confidence indicators in the region. We expect<br />
this release to support our stance on the stock as sector top pick in the medium<br />
term.
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