Zurich Insurance Group AG

James Quin - Investor Relations George Quinn - Chief Financial Officer

Vinit Malhotra - Goldman Sachs Michael Huttner - JP Morgan Andrew Ritchie - Autonomous Andy Broadfield - Barclays Farooq Hanif - Citigroup Atanasio Pantarrotas - Kepler Paul De'Ath - Royal Bank of Canada Thomas Seidl - Sanford Bernstein Nick Holmes - Societe Generale Stefan Schürmann - Bank Vontobel Niccolo Dalla Palma - Exane BNP Marcus Rivaldi - Morgan Stanley

Thank you and welcome to Zurich’s results presentation for the third quarter of 2014. I’m joined by our CFO, George Quinn who’ll make a few short comments before we open the Q&A.

As usual, please keep to two questions. I’ll now handover to George.

Thank you, James, and good afternoon and good morning everyone. As James said, I’ll make a few short introductory remarks.

So, first in General Insurance, we’ve reported a combined ratio of 97.7% for Q3 and within that we had good progress on our accident year ex-cat combined ratio which is 1.4% better than in the prior year. And that’s due to continued improvement in our underlying loss ratio.

Cat losses are well within expectations to Q3 but perhaps a bit higher than you may have expected, given a generally quiet quarter. And this mainly because of Hurricane Odile which cost us $90 million.

On PYD, we have a positive contribution to the combined ratio of 0.6% for the quarter and the nine months. And that’s again a bit less than the expected range of 1% to 2% that I indicated at the time of our Q1 results.

A bit like Q2, this is due to some specific identifiable issues with some volatility to be expected. But it doesn’t change what we expect from this in future.

Our Life results are in line with expectations. And we continue to progress on a strategy to reposition the business.

Some of the costs associated with these initiatives are included in the results. And at Farmers, we have some good news.

We are back on the growth track in terms of gross premiums and we’re pretty much flat in terms of policies-in-force. Overall, we characterize this as a solid set of results.

But as you’ve already seen from the presentation this morning, we may start to see some headwinds in the next year or so, given the market environment that we face. This doesn’t require any change of strategy on our part, but it does mean that we’ll need to push harder on some of the levers that we have around optimizing the capital allocation, around expenses and amongst other factors, to make sure that we hit our targets.

With that, I now look forward to answering your questions.

Yes, hi. Good afternoon.

Just my two questions first is, George, in the comments in the presentation in the morning, there is a mention that part of the 150 basis points underlying loss ratio improvement comes from NAC in Europe. Could you please comment a bit more, is NAC driven by the analytics and is Europe more the result of this retail focus [sense drive]?

And also I'm curious why not global corporate, given the pricing that it is holding a little better, at least in NAC? So, please any comments on that?

And just secondly, just on the -- you also said that you did not assume tailwinds but probably you had assumed a neutral position when they invested a target to set both on markets, on pricing markets, interest rates et cetera. So, how much is a concern around the headwinds that we see?

Thank you.

Thank you, Vinit. Good afternoon.

So, on the improvement that we see across GI, I mean you’re absolutely right. We did attribute in the commentary an improvement to NAC and in Europe.

I mean we see significant improvement in Global Corporate, I mean it’s about three points. But the challenge of Global Corporate is that the -- I mean the figures are just generally more volatile because of the impact of large losses.

So, it’s a bit harder in a given quarter to isolate the specific improvement in Global Corporate. But we do believe that that also contributes to the underlying 150 basis point improvement.

In terms of drivers for NAC and for Europe, I mean NAC, it’s been -- we're investing a lot on the predictive analytic side of it. But I think it’d be a bit rash to claim at this stage that it’s already a major driver of the very improvement.

I mean NAC has a market leading position in the U.S. and number of particular industry sectors.

I think they’re using their competitive strength but benefiting also from market improvement in those areas. So, it’s a combination of both.

And Europe, I guess main general rate improvement that’s been driving the improvement we’ve seen back. On the rate environment, so the -- I mean you’ve seen the comments I’ve made today on the market outlook, which -- I mean just to be clear, I mean impacts everyone.

I mean I wasn’t trying to be specific about the Zurich on its own. And hopefully, I’m not saying much that’s very different from Q2 but come back at planning where we put -- we’ve targeted together for the discussions in December last year.

I mean we hadn’t seen tailwinds but you’re obviously right, we didn’t assume significant headwinds either. I think we will see some refresher over the course of the next 24 months.

And I guess the commentary this morning was designed, one, to acknowledge what the company sees what I think almost everyone else sees. I mean hopefully it’s really not new; it’s really a signal that we are awake and aware, and also more importantly, to signal that we completely understand that that means we can’t stand still.

And therefore more effort is required to make sure that we get to where we have to be. And as I pointed out in the press release this morning, I mean we’re fortunate in the position that we have a number of different levers on our fingertips which range from the continued application of the very solid underwriting practices that we have already that have been partly driver of that 150 basis point improvement.

And we have an expense opportunity. I think we can be far more efficient than we are.

And finally, we are blessed with I guess a high quality problem on the capital side. We have a significant access against key target metrics.

And that positions us well, both for the organic opportunities and the inorganic. And so, I think you’re absolutely right, no headwinds, no tailwinds assumed; we’ll work harder and get to where had aimed to beat anyone.

Thanks very much.

Can you say just a couple of things, on the reserves or prior year development, can you say how much was the UK and whether it’s a kind of three year or two year recurring pattern there? And how we should understand the 1% to 2% going forward as being sustainable, given that some of your competitors are saying the opposite?

And then on the tax rate, I was interested to see that yesterday, you're guiding to slightly higher and I wondered if you could give me more insight into that; is this a mix effect because you have more profits out of the U.S. which is a high tax country or is it generally a rise in taxation from all countries?

Thank you.

Thanks Michael. Sorry, we are muting the phone in between.

I bet your pardon, sorry.

I’m worried we pressed the hang up button which we normally do.

Don’t worry. Absolutely good.

Good afternoon. So first of all, on the reserve releases, UK APH is a charge in the quarter of $70 million and may find that overall book, APH in total about $2.7 billion of reserves.

It’s type of thing that you don’t do every year, so we do, do periodic frequency. I don’t if it’s two or three, it’s typically three.

It does come around from time to time. I think as you’re well aware, it’s pretty rare that someone has an APH review and then announces a reserve release.

So, it’s a risk factor for sure. From an overall perspective, I said that’s Q2, so I am obviously wary of repeating it again, but I mean if again, I look through it, I can easily see that within the expected.

So, I have no reason to expect anything different from one to two in a longer term perspective and we’re not changing the guidance. But things like APH will come along from time to time but I hope that it’s not everything about APH.

We will have reserve reviews occasionally that do actually [change the releases]. Yes, we expect 1% to 2%.

On the tax rate, it seem odd but the tax rate comment today isn’t really the result of the rate you see for the quarter; it’s not really connected to that. I mean the rate we have seen, we have 33 for the quarter, we anticipate 29.4 for the full year.

I mean that’s a mixture of impacts which range from, things you’ve heard that before like Russia and changes in tax rates in Chile, the impact of Hurricane Odile ending up in low tax jurisdictions for us. But I mean structurally, I’d say I don’t perceive a change but we’ve just been through planning.

So, we are obviously forecasting or estimating what we expect to be producing for next two to three years. And in that given the mix that we see, I see obviously a tendency for the rate rise.

And again, just a caution about the fact that even if tax rates are more generally falling than rising. I guess the tax base in most jurisdictions has been broadened.

So, that is why I have increased the guidance today. I guess the most important point to make though is this does not change our expectations of achievement of the target.

So there is a positive in that part to make positive Latin American and generally higher tax rates but I need to make more profit before I pay more tax.

I see. So, I should understand the tax comment as not as negative but effectively you’re saying the U.S.

is going to deliver a lot more earnings.

Not, quite the U.S.

Sorry.

I mean if you look at the places with the higher tax, Latin America is the place that stands out. So, mix means slightly more expectation of profit from Latin America.

Excellent, thank you very much.

Thank you.

Hi there, two quick questions. George, sorry to go back to your transcript this morning.

That’s the problem with putting the transcript out; we can look at every word. The implication is that there’s slightly more headwinds than maybe you felt from the operating environment, but the steer at least from what you said, particularly the expression you used is meaningfully improve efficiency, it seems that -- have you discovered new opportunity in terms of be it cost saves, re-underwriting?

And you said there is more headwinds in the environment, but from a bottom-up perspective, is the group more confident; has it found new opportunities to improve things bottom-up? That’s what I’m reading from that but maybe that's reading too much, just to clarify that.

Secondly, farmers, is this the beginning of the growth phase; is it too early to call that; is there any more confidence? You had quite a lot of confidence at Q2 and we’ve seen that come through.

What are the sort of new business indications or customer feedback indications running out now in terms of future momentum? Thanks.

Thanks Andrew. So, on the first one, on the efficiency point, I am expecting at some point in the course of the call someone is going to ask me about say 1% expense ratio in GI.

There is a logical well thought through reason behind that expense level. I mean it’s not that it happen to be in our number.

So, we are deliberately investing to try and create better flat platforms to make it more competitive in a number of markets. But I mean that’s not a sustainable level for the expense ratio.

I mean we’re certainly setting a hard target for a year. I know that when Mike Kerner looks at it, I mean he looks at the peer group.

I mean it’s certainly his ambition to be at least as good if not better than that in the peer group. I mean we know what type of number peer group expense ratio starts with.

I mean we’re not like announcing a restructuring or some grand efficiency plan today, but I think there are a number of areas where we have an opportunity to be more efficient. And it’s more important that we pick them, given some of the commentary that you had from me, I mean not only me, but from other market observers on rates.

So, I wouldn’t characterize it as the group that just discovered them because I mean we’ve had a number of things pointed out over some time. I mean we’ve got to do the logical and obvious things to make sure that we can maintain the commitments that we have made and expense is what plays part in our process.

And just to be clear, when you talk about commitments, you’re talking both the ROE and the BOP growth commitments, is that what you're saying or do you put more emphasis on one than the other?

So, we have two sets of targets, one financial and one strategic. And they’re all equally important.

Okay.

On the Farmers Group side, I mean with the benefit of hindsight, it seems obvious, I mean to me. If you look at the chart, it’d be hard to believe that you couldn’t have reached this point given what we’ve seen around retention, new business and agents et cetera.

We remain optimistic. I mean I want to avoid announcing some target for Farmers today.

But obviously, we’re looking for them to sustain what they’ve achieved. But we’ll have Jeff Dailey at the Investor Update in December and he’ll go into this in more detail there.

But obviously we’re very pleased with the fact, they are back in growth. I mean financially, it’s not immediately significant impact to this.

But I hope it form a sentiment perspective, it gives people more confidence that -- I mean we actually have a very effective model here of exchanges though.

Okay, thanks.

Hi, good afternoon. Two questions, please.

One, on capital and one just on expenses, to be original. On the expenses, if I look across your business, it’s hard to see any major earnings momentum that won’t be driven by self help, frankly, so your momentum has to be driven by actions that you take.

Should we expect at the Investor Day that we get a little bit more specific guidance on those actions being taken because that still feels to me a little bit -- that we’ve got turnaround businesses, but not totally clear beyond transactionally what you’ll do there? And is there any intention to set targets?

You seem to be downplaying it literally the degree to which you can do this, it feels a little bit like you’re talking about bits and pieces that you can do rather than any great grand plan, so some guidance or thoughts around when we may get some guidance on that. And on capital, you stressed it frequently in the commentary this morning and you said it again today about the flexibility.

I wouldn't expect you to be making any great announcements to my question. But is that for you a key lever in starting to ease some of the areas where there is a little bit of pressure on the business and if you can give us any color on that that would be useful.

It’s amazing how two questions can seem like a lot more than two questions. So, first of all on the expenses.

I mean completely agree with you. I mean it needs to be self-help.

But I think the good news is it’s not purely self-help around expenses and that’s why the comment on levers meaning more than one. So, I don’t have much to add to what I said to Andrew a second ago.

I mean I don’t expect to take part of the time in December to cover expenses. I mean we’ll have two of our business leaders there.

I mean expenses may come up in the context of the presentations they make. But I don’t anticipate that we’ll have a session dedicated to expense management in the December update.

And as far as targets go, I know it’s clear if I said targets but I think the group has enough targets already and I think our focus needs to be on achieving them and within achieving them, expenses plays its part. I think it will get clear as we go -- I'd like to deliver some improvements rather than necessarily set new numbers.

I mean it’s clearly an area where we have the potential to improve. Maybe just to add a couple of other points and the other things, so there is not just purely an expense discussion.

I mean even though I’m not that confident on margin expansion being offered by the market environment, I don’t believe that the growth completely grinds to a halt either. I mean I think that we have an opportunity, for example on Global Corporate, there are a number of things we can do to increase the numbers of products that we sell to our clients.

I mean there is a number of things across the entire client universe that I think still lead to growth. And that would expand the absolute economics even if rates don’t help us.

On the capital side, I don’t really have much to add to what I said at Q2 around priorities. I think you’re aware, I mean ordinary dividend growth, organic growth and inorganic and if we have excess, the possibility of capital repatriation.

I think generally though, I mean I’m firmly of the belief that dynamic capital management is a key part of the management of any insurance company. So, I think there are still things that we need to do to improve the allocation of capital over the course of the next some 24 months.

So, I do see that as part of the answer to some of the questions, it’s not just an R issue; it’s also an E issue.

And S&P is still the main constraint on the capital side [this year] because there was some good news on that earlier in the month or last month?

Yes, there was. And they decided, we could move to positive and S&P is still the main constraint.

Okay. Thanks for that.

Hi there. Thanks very much.

I wanted to just change direction a little bit. So, in the Life business, you’ve obviously taken some costs in the other line to do partly with in force management.

And I’m just wondering obviously -- how long is this going to continue, what's the scope of it, and what are you trying to achieve with this particular thing that you're doing right now? So, is that expense reduction; capital release, if you could give some more information that would be quite useful.

And then on large losses and just the point you make about it in terms of normalizing, if we went back to the old language of the large loss ratio, where would we be right now? Thanks.

So, on the second one, you have me at distinct disadvantage because I’m not that familiar with the old language, to be honest. Maybe the IR team could there be afterwards, if that’s okay.

Okay.

Sorry about that. So on the other course, on the Life side; unfortunately, I’m not going to give you a much more satisfying answer to this question either.

So, it’s relatively hard to talk about all the things that we’re doing because, if I do, it wouldn’t necessarily help us because of flags and things to the market ahead of time.

Yes, okay. Okay.

So on the Life side, so is this going to be potentially, I mean something that we should bear in mind happening again and recurring, so when we think about one-offs versus recurring items?

I mean what we see this quarter, I mean what I wouldn’t immediately tell is one-off; I wouldn’t expect it to occur at the same level in all of the following quarters. I mean obviously we’re preparing for, I mean what you heard from Kristof around Q2 and the targets -- not the targets, but the planned improvement that he has on BOP.

So, we’ll take some of this, I guess the proprietary steps are necessary to work on the operational improvement that you talked about but also work on the capital side of things for Life. So, you’ll see more of that in due course and you’ll definitely see more of that in May next year where Life will be one of the key focal topics.

Okay. Thanks so much.

Yes. Thank you for taking my questions.

Good afternoon. I have two questions; one is regarding your statement about the softening market in GI.

I wonder if we have to consider the current level of accident year loss ratio at around 64 as the bottom, so we can expect to see some deterioration ahead and what could be the strategy of Zurich in the case of a softening market? I mean we have expected to see reduction in volumes to defend the profitability, as we saw in 2009 and ‘10.

Second question is on realized gain. I saw that you realized this year particularly high level of gains; BOP in below operating line and also in the Life business.

And I wonder if you -- without this realized gain, the Life business, your net investment income is still pretty much good or you need to realize some gains in order to give credit enough to your policyholders. Thank you.

So, on the softening market in GI first and obviously the comment today was really designed to highlight that particular risk that you referred to. And if do see a softening market what do we do then, I think mainly the things I referred earlier on the call, so focus on continued discipline and underwriting.

I think you’ve seen the company’s track record here. We are not driven by volumes; we are absolutely focused on profit.

Obviously we’ll defend the positions that we’ve created over time. But I mean we have a focus on margin before anything else.

I mentioned earlier, the potential for efficiency. And then of course we also have the capital flexibility that I outlined earlier.

I think all three of these things would play into our attempt to make sure that any softening that we see in the market doesn’t endanger the overall targets that we have. On the Life side, let me point you there, there is a particularly high level of gains.

If we focus first on the BOP component, I mean that’s really a policyholder piece of the equation. I mean it’s not being driven by our shareholder, neither expectation.

So, I don’t see as a particularly for sustainability of the Life performance. Outside of BOP and in NIAS, I mean you’ve seen pretty reasonable level of gains but I guess I’d highlight particularly in Q3 that they’re somewhat automatic that; it’s more an outcome of the accounting than a decision that the company has made because it’s made revaluation of property.

So, unfortunately we don’t entirely control that. Those are the drivers of the gains that you see.

Okay. Thank you very much.

Yes. Hi there.

Just a couple of quick questions hopefully and firstly on Farmers and just looking at the margin, the 7% margin on there. You mentioned in the speaker notes that this is kind of in line with longer term guidance.

I guess in the more short-term, is this kind of a level that we should be expecting that margin to be at? So that's question one.

And then question two was just very quick thing on the non-core result, which obviously was one of the kind of swing factors in the numbers for this quarter and just if you could elaborate slightly on that and where that number might be going in the next kind of few quarters though, and that would help a lot. Thanks.

Yes. Thanks Paul.

So, first of all on Farmers, I mean yes, I would guide you to expect the margin to be around this level. I mean we’ve seen it around here in the past; our guidance was (inaudible) was sustainable and that’s why we’ve guided up this quarter.

So, I would suggest that you use as the forward looking projection. On the non-core side of things, I mean non-core is slightly difficult to predict.

As you pointed out, we’ve gone from I think t was $24 million, $25 million profit in the same quarter last year to almost same number, the opposite, same this quarter. I mean we still have a number of portfolios in there.

And the priority is to get rid of them and ideally release the capital as quickly as we can. And so you will still see a bit of volatility in non-core.

I mean the decisions we’ll have to be driven by what we perceive to be shareholder. And does mean it’s relatively difficult to predict the absolute impact in a given quarter.

Having said that though, the amounts that we have left are not huge but it’s unlikely I think that we see large fairly swings, profits or losses in a given quarter. You may see a bit disturbance from time to time.

So, apologies, I can’t really give you a clear steer on the likely level for non-core business.

Okay, thanks.

Yes, thank you. Good afternoon.

Two questions, one on the general insurance side. We know that the main area growing right now is international market, 9% in local currency.

However, this is the weakest margin market. I wonder whether we should expect hence a deteriorating business mix, and if this is sort of the right direction Zurich wants to go?

And secondly, on Farmers, 0.6% growth, according to what we know, this means Zurich Farmers is still losing substantial market share in the U.S. And I remember from the Investor Day last year that one of the actions management wanted to take was cost cutting at Farmers to be more competitive.

And I wondered if you could give us an update where Farmers is on this cost cutting journey.

Thanks Thomas. So, on the first one, I mean for obvious reasons it’s not our aim to achieve a deteriorating business mix.

I mean we’re looking to allocate capital to areas that generate returns. And if we see growth, whether it’s in Global Corporate, NAC, International markets, Europe or anywhere else, we believe offers attractive returns and we have the capital this quarter, obviously not looking to chase this therein by allocating to business that doesn’t return the required level of return.

Do you think it's fair to say that IM or international market is the lowest ROE segment and also looking just at a plain number like combined ratio, net of nat cat is 102% which is markedly above the rest of the Group?

Yes. So, I think coming back to growth, I mean it’s [1%] from a low base but 2% adjusted in Global Corporate.

I mean you can guess which has the far more significant contribution to profitability. On the second question on Farmers, I think if you stop at the 0.6, I think you’re right.

But we would go further than simply to look at the 0.6. I think if we look at the core of what Farmers is to retain over time, so that’s why exclude 21st Century brand which of course is not supported anymore, and we also exclude the business insurance run through independent agents, we see a number more like 2.6%.

We’d always be happy with a number this higher. Given where Farmers is coming, I think we’re happy with the progress that we have made.

I mean we hope to see more, we hope to see them sustain what they’ve done. So maybe this is a relatively important watershed for Farmers.

On the cost control side of things, I think things are broadly flat and Jeff and the team have certainly been looking at trying to optimize things in Farmers Management Services. But I don’t have a particular update for you.

Of course, we’ll have Jeff again with the Investor Update in December and we’ll see if we can give you a bit more insight there. Thank you.

Alright. Thanks George.

Hi there. Thank you very much.

I just wanted to come back on the GI expenses. A lot of your peers seem to be focusing on direct insurance; and really you don't seem to be doing this nearly as much as some of the other major European insurers.

I just wondered if you could tell us a bit more about the rationale for this, because it does seem to be a very obvious way of managing expenses down. Thank you.

Thanks for the question, Nick. So, I mean it’s not that Zurich doesn’t have direct insurance business, it does; it has one in Italy it has one in Germany.

So, I think that our focus is typically on a different segment of the market. I mean in terms of Zurich composition, we normally offer more than simply bare-bones to lowest touch possible product.

And therefore you don’t normally find out compete at the bottom end of the market, I mean lowest price, lower cost product, it just doesn’t fit with us. So, we’re looking to.

And we’ve done a lot of work over the last two years, segment the portfolio and look for the customers that we think the value proposition fits best and then to particularly target then. And that does mean that some markets will run a high expense ratio that of course we look customers to pay for that.

And we look to provide the customers with the service that that would imply. But I think given the way that we operate, I think expansion, a wholesale expansion of the business into what’s really a low margin business on the direct side.

And I’m not sure it would make much sense for us.

Okay. So, you don’t think that in personal lines, direct is sort of the big question mark in Continental Europe that could change personal lines quite dramatically?

I guess that that’s a much broader and bigger question. If the question is do I think that we would see the model that we’ve seen elsewhere, for example in the UK or maybe things like GEICO or Progressive in the U.S.

important here, I am sure to some degree, well. But do I believe that’s the only segment of the market that would be open to company like us, no I don’t.

Do I believe that we can find attractive returns in the segments we have the proposition to satisfy, I absolutely do. So, it’s not that I ignore it; it’s not that I think is unimportant, but it’s a segment of the market where I don’t think we are particularly well equipped to compete.

And we don’t target a particular area. So, we’re looking at different sector.

That’s great. Thank you very much.

Very interesting.

Yes. Good afternoon.

I have two questions. The first one is on basically the survival ratio of your asbestos book.

Can you maybe update on that now after having added to reserve, and so the three year survival ratio? The second question is on basically claims inflation.

I mean you clearly state that claims inflation is still running below your average rate increases. But I mean do you see any, maybe increasing signs on the claims inflation side which is part of your statement that you see basically more a headwind from the market environment?

So, on the first one, I don’t know the answer to the question. And in fact just before we started, I realized I didn’t know the answer to the question.

We’ll have to get back to you Stefan, on that one, so apologies. On the claims inflation side, I guess the bright spot for the time being is that claims inflation still doesn’t seem to be a major issue but the rate and lost costs still seem to be in reasonable balance in Q3.

I mean if we look around the portfolio, we don’t see signs that claims inflation is eminent. But having said that I think we have to be cautious and we have to be cautious in some particular areas, and especially obviously the long tail ones that are particularly exposed to it.

But I guess the positive part of the current environment is that the trends are driven by competition rather than claim inflation.

Okay.

That’s my perception.

Yes, thank you.

Good afternoon, everyone. I have two questions, the first one on Global Corporate.

Earlier in the year, actually Mike Kerner showed an interesting slide on where you are in terms of the international programs around $3.8 billion and how it had been growing for the last three years. I wonder whether you could give us an update on how that is growing now and any comment you can make on the competition from the reinsurance sector into this business or from new players, or whether it's still something you feel only a very few players can offer, hence the growth is quite sustainable at those close to double-digit levels?

And the second question on the APH reserve strengthening, whether you could tell us which of the three letters it was? The reason I ask is there is some discussions on industrial deafness claims in the UK; is that the reason or is it the asbestos part, or I can follow-up with the IR team later if necessary.

Thank you.

No, need to follow up, for that one, I know. On the first one, on the Global Corporate side -- I mean we’ll have to come back and update on the 3.8.

I don’t have that at my fingertips. On the competitive environment, this is a difficult sector charge, so very, very few people that can do what our Global Corporate business does.

It’s an incredibly high touch business that required an immense global network, risk engineers and in some cases, almost like an integrated is the risk management of some of our clients. So, I think it’s a very difficult business to replicate that requires -- it’s a heavy administrative burden not only from policy issuance through claims settlements.

It’s clear to me that there are number of people who’d like to be in this but I don’t think it’s easy at all. I think the barriers to entry to this particular group are extremely high indeed.

On the APH side of things, I mentioned earlier that we’ve added just $70 million to the APH in the UK. There is a bit under [aim], so about $30 million asbestos side and the remainder comes from health related topics.

Thank you very much.

Good afternoon everybody. So George, if we just come back to your comments you were making about achieving strategy, I mean only a few months ago now I think in London, the sense I got was that there was a very high confidence on within the group of exceeding the bottom of the target range.

And the sense I felt was you already had at your disposals lots of levers to drive the R element of that to a point where you can be achieving that. The tone today clearly is a lot more I think cautious.

And I think I’m just confused really about the reasons you’re giving out for that seem to be very apparent and have been there for quite some time. So, I was wondering if you could comment about that.

Secondly, you also, I think at the half-year, you were questioned lots and lots about capital management; and you gave ways of structure about how you'd be thinking about capital management. Has the managing the E moved up the agenda in terms of the priority list there?

And then finally, just a question on the numbers, on Global Life, obviously Europe BOP was a major contributor to improvement in the Q. Is there any way you can give some sort of guidance, soft guidance with regards to your sources of earnings disclosure about what was driving that please?

Thank you.

So, first one, achieving strategy. So, I mean apologies, I have caused confusion.

I mean it’s probably my (inaudible) communication. I guess what I wanted to try and do today to actually do, in the written communication something that I think we’d be doing in the one on ones already.

I mean it wasn’t really an attempt to change tone but it really was an attempt to make it clear to the market in general that we recognize as I thing everyone else recognizes that it won’t get easier from here. But it was actually aimed to be a slightly positive message rather than negative one.

And that I mean as you pointed out, around Q2, I mean I clearly told I think everyone I met that we have the levers at our disposal that we believe will be sufficient to get us where we need to be. So, this wasn’t an attempt to change direction or somehow signal some fear that the targets are not achievable.

I mean actually it was the opposite. I mean it was trying to signal that we are realistic about what’s taking place.

And we believe that in addition to the realism, we actually have the tools at our disposal to address the issues that that realism brings to us. So, apologies for the confusion.

On the capital management, has the E moved up the agenda? Absolutely not, I think E is always really high in the agenda.

And I think it’s typically very difficult in an insurance context, particularly in life and to make significant changes in capital allocation. And the current environment is going to be relatively painful; it’s going to cause volatility in the reported earnings that would not be welcome.

But having said that, I mean because very few people do that, I think if you can do it, I think there is a benefit to be had. So, I’m a firm believer that managing the E is actually more important than anything else, and for the business.

And so, if you look at how the is capital is allocated and how the returns are generated, but E is just really high on my list of priorities all the time. And the last one is Global Life, but I didn’t catch the question, Marcus.

Could you repeat for me?

Yes, certainly. So, just the Europe was a major driver for the improvement in Q3 this year, and I was just wondering if you could give maybe some color around the new sources of earnings disclosure, what may have been driving that particularly.

So, I apologize. I can’t connect it back to the source of earnings for you.

Obviously, we’re focused on a number of areas in Europe trying to improve profitability. That obviously benefits us.

I mean there is more going on at the Global Life than simply Europe. And some of the improvements that we see in other parts of the business are somewhat masked.

So for example, I mean we’ve had very substantial growth and the contribution from the Zurich Santander business. But it’s not so visible because of the impact of currency.

Of course currencies are risk that we take when we write that business. But I mean from a longer term perspective, I mean I’d expect to see Latin America disproportionate contributor to what we see in Global Life.

But on top of that I expect Europe to continue. A large part of what we Kristof and team are trying to do on the in-force management side is focused around Germany and the UK.

We believe we can be a bit more efficient; we tackle some issues around asset allocation and can we look at capital. So, I mean I expect to see some of that continue.

But apologies, I can’t connect it back to the source of earnings for you.

Okay. Thank you very much.