Zurich Insurance Group · PDF fileZurich Insurance Group Annual Report 2016 Zurich Insurance Group Group overview Governance Group performance review Financial information Additional

Annual Report 2016
Zurich Insurance Group

Zurich Insurance GroupAnnual Report 2016
Highlights
1 Business operating profit indicates the underlying performance of the Groups business units by eliminating the impact of financial market volatility and other non-operational variables. Total Group business volumes comprises gross written premiums, policy fees, insurance deposits and management fees generated within General Insurance, Global Life and Farmers.
2 Shareholders equity used to determine ROE and BOPAT ROE is adjusted for net unrealized gains/(losses) on available-for-sale investments and cash flow hedges.
3 The Zurich Economic Capital Model (Z-ECM) is aninternal measure of capital adequacy and reflects midpoint estimates with anerror margin of +/5 ppts.
Our cover
Formulated by our people, for our customers, our new strategy will guide us in our efforts to provide the best service and products. Our cover shows the individuals who worked with 12 senior Zurich leaders over five months to develop our new strategy. Learn more on page 7.
Note on terminology
As part of the simplification of our business, we are removing the segment layers of General Insurance and Global Life.The new business structure is focused on geographic regions and consists of Asia Pacific, Europe, Middle East & Africa (EMEA), Latin America and North America. Further, the Group has created anew unit called Commercial Insurance, which combines Corporate and Commercial businesses into asingle global business. Starting in 2017, the products and solutions belonging to the former General Insurance will be referred to collectively as Property & Casualty, or P&C; the same applies to Global Life, which will now be Life; Farmers remains the same, but in future will contain the Farmers New World Life business results.
USD 4.5 bnBusiness operating profit (BOP) 1
USD 3.2 bnNet income attributable to shareholders (NIAS)
11.6%Business operating profit after tax return on equity (BOPAT ROE) 2
USD 10.4 bnCash remittances over 2014 2016 period
USD 67.2 bnTotal revenues
USD 190 bnTotal Group investments
Z-ECM 122%Zurich Economic Capital Model ratio 3 estimated as of December 31, 2016
AA/stableStandard & Poors financial strength rating of Zurich Insurance Company Ltd as of December 31, 2016
Zurich Insurance Group is aleading multi-line insurer that serves its customers in global and local markets. With about 54,000 employees, it provides awide range of property and casualty, and life insurance products and services in more than 210countries and territories. Zurichs customers include individuals, small businesses, and mid-sized and large companies, as well as multinational corporations. The Group is headquartered in Zurich, Switzerland.

Group overview Governance
Group performance review
Financial information
Additional information
Contents
Group overview
Message from our Chairman 2
Message from our Group CEO 4
Business environment 8
Strategic overview 10
Business review 2016 12
Governance
Message from our Chairman on corporate governance 26
Corporate governance report 28
Message from our Remuneration Committee Chairman 74
Remuneration report 76
Message from our Group Chief Risk Officer 114
Risk review 116
Operating and financial review 148
Consolidated financial statements 166
Holding company 276
Shareholder information 294
Glossary 295
Contact information 297
01
At Zurich, our focus is on long-term, sustainable value. Founded in 1872, today we are one of the worlds leading insurers. With our knowledge and experience, we help our customers to understand and protect themselves from risk. Our success is tied to principles of sound corporate governance. Our Board and management focus on delivering high-quality results. Merit-based incentives encourage our people to do their best. Through our products, services and expertise we can benefit society as awhole. We are mindful of our responsibilities to all our stakeholders. Now and in the future.

Message from our Chairman
2016 was ayear of transition. I am confident that our new strategy and structure will allow us to meet the challenges and grasp the opportunities that lie ahead.
Looking to the future, building on our strengths
USD 30.7 bn Shareholders equity
CHF 17.00Proposed dividend per share
Tom de SwaanChairman of the Board of Directors
We will work toward becoming a more agile and customer-focused organization.

General Insurance
Property and casualty insurance and services, risk insights.
USD 2.4 bnBusiness operating profit
USD 33.1 bnGross written premiums and policy fees
Farmers
Management services related to property and casualty insurance.
USD 2.9 bnManagement fees and other related revenues
Global Life
Protection, savings and investment solutions.
USD 30.3 bnGross written premiums, policy fees and insurance deposits
Group overview Governance
Pages 152 to 156 Pages 157 to 160 Pages 161 to 162
03
For Zurich and externally, 2016 was ayear of transition and change. Following his appointment by the Board, Mario Greco began as Group CEO in March 2016. His immediate focus was how best to position Zurich for long-term sustainable success. This culminated in our new strategy presented to investors in November 2016. The strategy provides Zurich with aclear direction, afocused set of actions and asimpler, more efficient way of working. Our aspiration is to serve every customer in away that feels personal, is effective and is uniquely Zurich. The new strategy harnesses Zurichs core strengths. These include our well-balanced geographical footprint and portfolio, our solid financial base, our trusted brand and our highly skilled and talented people.
To be successful, Zurich must ensure its culture and behaviors are consistent with its strategic aims. We will work toward becoming amore agile and customer- focused organization, with anaccountable, collaborative and merit-based culture. One example of how we are increasing our focus on customers was our decision to merge our Global Corporate and Commercial businesses into asingle, strong Commercial Insurance unit.
Our ability to reduce costs and increase efficiency is implicit within achieving the strategy. We are pleased that expenses fell significantly in 2016, reflecting actions taken during the year. We will continue to focus on achieving net savings over the years to come in line with our targets. Zurichs encouraging 2016 results show that
our new strategy and organizational structure already are beginning to take effect. We achieved underlying improvements in our General Insurance business, acontinued strong performance of our Global Life business, and in Farmers.
Focusing on sustainabilityThrough this period of organizational and strategic change, Zurich remains focused on corporate responsibility. By acting responsibly, we can create sustainable value for all our stakeholders. In 2016, Zurich achieved its highest score of 85 in the Dow Jones Sustainability Index review, outperforming 97percent of other companies in the insurance industry group. Our responsible investment approach was awarded the Institutional Investor Institutes Peer-to-Peer award for Best Environmental, Social and Governance Programme. Meanwhile, Zurichs award-winning flood resilience program continued its work within our flood resilience alliance in communities in Mexico, Indonesia, Nepal, Peru and Bangladesh.
Challenges and opportunities2016 saw persisting challenges in the external environment, including the transformative effects of digitalization. This means insurers must disrupt or be disrupted. Meeting this challenge is aconsiderable task, compounded by alow-yield environment, which poses particular problems for the insurance industry. Meanwhile, ashifting political landscape creates uncertainties for future legislation and regulation governing globally active insurance companies such as Zurich.
Zurich is well positioned to succeed in this environment. Our new strategy and organization will help us in our aims to deliver the disciplined, sustainable profit that we have already seen the beginnings of in 2016.
Going forward, Zurich will retain its identity as aglobal insurer. We will continue to champion the benefits of free and open cross-border trade, which has lifted millions out of poverty to date. We will navigate external challenges and seize the opportunities presented by trends such as digitalization. And we will strive to deliver success sustainably as aresponsible business.
With arobust new strategy and structure in place, I am confident we will meet the challenges and grasp the opportunities that lie ahead. Thank you for your continued support.
Tom de SwaanChairman of the Board of Directors
Our business segments

Message from our Group CEO
Mario GrecoGroup Chief Executive Officer
Our strategic aimsAt our Investor Day on November 17, 2016, Zurich announced anew strategy that positions the company for future success. Building on its solid fo

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Zurich Insurance Group · PDF fileZurich Insurance Group Annual Report 2016 Zurich Insurance Group Group overview Governance Group performance review Financial information Additional