Zurich Insurance Group AG

Richard Burden - Head, IR George Quinn - Chief Financial Officer Mario Greco - Chief Executive Officer

Farooq Hanif - Credit Suisse Nadine van der Meulen - Morgan Stanley Peter Eliot - Kepler Cheuvreux James Shuck - Citi Andrew Ritchie - Autonomous Thomas Seidl - Bernstein Michael Huttner - JPMorgan Johnny Vo - Goldman Sachs Andrew Hughes - Macquarie Vinit Malhotra - Mediobanca Dhruv Gahlaut - HSBC Ralph Hebgen - KBW

Good morning, good afternoon, everybody. Welcome to Zurich Insurance Group's Full Year 2017 Results Call.

On the call today is our group CEO, Mario Greco and our group CFO, George Quinn. Before we start with the Q&A session, I would just hand over to Mario to make a few introductory remarks to the results.

Mario?

Thank you, Richard. Good day to all of you ladies and gentlemen and thank you for joining us.

Let me make a few remarks before George and I get to your questions. First of all, I'm very, very pleased with our full year result.

I'm pleased because to demonstrate that we're making progress against the targets that we set in November, 2016 and we're getting traction in achieving this target. And '17 has been a challenging year, so nothing has been really easy and which makes our achievements even more relevant, especially given the weather events that we faced.

The expenses plan is well on track as we wish it to be. $700 million of achieved savings at the end of '17, I think it is a good demonstration of the discipline that we've been introducing and we follow through the years and it talks well about what we will deliver over the next two years.

The Property and Casualty business has cleanly improved in the second half of the year. Its top line is not just stabilized but has started growing again.

The composition of the new business through '17 has been what we wanted achieve, which also says that we have reestablished clear communication of our strategy of our appetite of our underwriting priorities with the market and with the brokers. The underwriting performance has also moved for better.

The accident year loss ratio shows a clear improvement and the same is for the other underwriting expense ratio. I'm also pleased to see that our insurance program, which we changed a year ago, has work less and has protected effectively the capital and the P&L of the company in such a tough year.

We are definitely focused on improving the underwriting performance and underwriting we're pleases, but we know that the journey is a much longer one and that we have to continue making improvements. We're confident now that we know what improvements are and that they can be achieved.

Pricing is getting better. We so see positive pricing movement especially, North America and we expect this to continue during the year and to give us some good support.

Life had an extremely strong year. BOP is at 11%, even taking into consideration in that the UK, recent changes on taxes of unit linked products.

The product mix has improved and this sustains our margin growth in the year and the new business value increase. The bank distribution which has been a strength of Zurich has continued to be very successful.

The South American business has further developed and the Spanish business with the banks, but then has also grown very nicely and we added at the end of the year a new business in Australia with ANZ, which we think will perform equally well starting from this year. Farmers had a very tough year, especially for the natural catastrophes, but through this year they've improved combined ratio very effectively and they ended up the year with much better customer results, customer satisfaction and retention and they reached the highest historical peak of customer satisfaction at Farmers.

Premium growth has been very successful and again all these evidences support us in being optimistic and confident on 2018 and following year. Capital has always been a strength of Zurich and still at the end of '17 our capital position is very strong.

The Z-CEM is at 132 and of course we will continue managing our balance sheet in an active way and we will continue looking for ways to further improve our capital position. Now, coming to capital into the decision we proposed yesterday to the board, the most visible and relevant one is about the increase in the dividend.

You all know that George and I've been speaking about raising the dividend since November '16. We knew that this was in the plan.

We're pleased to see that we can do this already this year, but we knew that this was achievable for us anyway. The reasons that we gave to the board were the strong performance of '17, but even more the confidence we have in further improving this performance in '18 and in the following years.

The business is getting better, we're getting a better traction on the business and these are the two elements that convinced the board to approve the proposal and bring it to the AGM. We also proposed a change in the capital quality in order to avoid dilution to shareholders from the past and for the future and again the board has supported that as a wise policy for shareholders rights.

Just to sum it up before I leave it questions, we're pleased with the results. We think that we're delivering on what we promised to you and we have confidence that this will continue in '18 and in '19 and we will continue delivering on the targets that we announced to you in November '16.

I like to stop here and George and I are happy to take all your questions.

Hi, there. Thank you very much.

Given the statements you made about your confidence on the 95% to 96% combined ratio. Where does that leave us in 2018?

I mean to ask in a clunky way do we just assume that you're kind of half way there and to what extent those expense ratio play upon now in that? And then very quickly on the Life business, it looks like if you add back the UK one off that you - you're getting towards the 340 to 350 millionish run rate, obviously we have to take currency into account based on factors, but where do you say the run rate is and the growth prospects for that.

Thank you very much.

Hi, Farooq, it's George. So starting with the combined ratio topic, and just to remind everyone that we're looking for a combined ratio of 95 to 96 by 2019, given the plans that we've got, I guess it might to be a bit generous to say that we're half way there.

I think if you look at the results, I mean the strong in almost every single corner other than this area, right. We see result, but we're not quite yet where we want to be.

And I think if you look at it, I mean the biggest challenge within it is commercial. It's a topic that we had already started to look at debts and as we put the plans together for '18 versus back in September, where we had a talk with James Shea on what changes are required in the portfolio to really drive the improvement that we need to see.

We can see a number of areas where we can make significant changes. Those are set to be put in motion already, so I mean this is the year we expect to see significant improvement.

I'm going to avoid giving combined ratio guidance for 2018. I think it's important to focus on what we're trying to get to overall.

I mean if you look at the entire business, we've obviously benefitted from the very strong performance on the retail and other side of things, but commercial is the one stand out here we got more work to do. Expenses will certainly help contribute.

I mean we still have $800 million to go, you can expect the bulk of that to fall into P&C and as we talked about before that's what - I ran a couple of points on the combined ratio, that overall mechanical performance despite this, we do still expect to see improvement from where we are in that.

So just - I like to quickly follow up on that point, so you think the expense ratio has had a mixed effect, which make it look like it hasn't gone done even though it's sort of half, but do you think that will now start to show a lower ratio going forward?

I think if you look at the ratio, over the course of the year, you see a reduction already, so if you look at the different components, we got about one point reduction on expense, one point in the actual loss ratio and we're one point commission to the mixed change. We're slightly overall on PYD compared to our normal expectations within range, but slightly low in the range and of course you all know why that is?

That's because it was not moved in over the course of the year. Having said all of that, I do expect to see the expense ratio improve.

There will still be some mixed movement, but we're also expecting to see a technical improvement, so loss ratio improvement. A continuation of what you've seen already on the accident year loss ratio with a particular focus on commercial.

In the Life BOP topic, so you're not putting around the numbers. I think we'll be slightly more cautious on Life.

So that means the guidance we're giving today, I think if you look at the headline number, I don't back out the UK yet. Start from the headline number and anticipate something in the mid-single digits growth, that would be okay for Life.

Okay, thank you very much.

Yes. Hello, can you hear me.

Oh, yes Nadine.

Sorry. Good afternoon.

Thank you for taking my questions. I thought firstly on Life, the new business volume very strong, margin was particularly up 23.3%, can you talk about how sustainable you see that being?

Second question on excess capital, the 132% Z-CEM, Mario just mentioned there, you're looking for ways to improve the capital position. I suppose it's not optimal, the 132% that you show on Slide 37, the target of 100% to 120%, which - I mean could you - translating that into dollars, if you take the midpoint of that, you're talking about a 6, 7 billion excess.

Perhaps you can elaborate a little more on that what your plans are there and on what time period. And then lastly on the US commercial side, Premiums in large commercial were down, what should we expect as a volume growth going forward and we see rate increases, competitors have shown similar indications.

So what is the outlook in terms of claims of inflation there relative to these rate increases? Thank you very much.

So I'll start with new business value. I think if you look at the detailed picture on new business value, one or two items we would see more one off nature, so we have a restructure of a lost corporate contract in the US.

But by and large I mean the biggest driver what we see is combination of economic variant, so the interest rate environment has certainly helped us last year and then mix, so we have an improved mix particularly in earnings and that's the combination of absence of selling some of the high margin products and an absence of some of the rural margin higher volume stuff that we did in 2016 and we talked about it before. So I think with one exception, most of it is something we would anticipate sounding to the current environment we can continue to drive.

On the capital topic, so you've seen today that we announced let's say two, including the impacts of share repurchase for the IT division program and as you pointed that's still well ahead of the target capital level. Our capital management policy is completely unchanged, so we'll continue to do the same thing as you've seen us do before.

Our priority would be growth and if the growth exists and that growth can be either organic or inorganic and after that if really can't find ways to deploy the capital interest to shareholders we will look to recommend, but obviously we prefer to find the growth if we can. Mario?

Yeah, on the business, the premiums and the claims Nadine, so first of all we don't see much evidence yet of any inflation creeping at or developing itself. Claims numbers are quite stable and frequency is falling down and the cost of the claims is nearly positive.

So it won't be quite forward we've seen so far. On the premium side we see movements in North American property rates definitely and market has alerted all of you on that and we just see that ourselves.

We don't know for how long this will continue, but definitely will through this year. This growth that we see coming is - it comes from two different sources.

So first of all we are gaining back in the retention rates. So we're doing much better than in the past years in renewing with the customers.

And the other thing we've been quite successful through '17 and we plan to continue is developing the lines that we're pursuing, so we've been growing on specialties quite successfully. We've been growing on credit lines, so short-tail business has been successfully targeted by us during '17 and we'll continue growing on these businesses through '18.

But the message that underwriters have is to grow the profitability, so to go for bottom line, not to go for top line and we're happy to get the top line moving positively, but the targets to priority that the underwriters have and they sit on the bottom line results of their lines of businesses.

Thank you very much. Just a quick one on the growth, as George mentioned the growth organic or inorganic and Mario as you said - you've talked to short-tail lines, is that the sort of the P&C short-tail lines that I should be thinking about when you're talking about growth organic or inorganic?

Yeah, I'm really meaning organic growth. So what we've been doing since 2016 is to be very clear internally with our underwriters and externally with the brokers, with distributors on which volumes we would like to go for and also which, if any portfolios, we will not like to underwrite.

Consequently we saw the new business started shifting and we're quite happy with the composition of new business that we saw coming in through 2017. And by having - had already meetings with all the main brokers through January, I can say that they well understand what we want.

They would appreciate what we're after for in 2018 and I think they would support us in growing in the lines of businesses that we're targeting.

Thank you very much.

You're welcome.

Thanks, very much. The first one was just on the free fund line, you've given us the underlying BOP, I wonder if you could also just share your view on the underlying net income for 2017, just to engage and how the dividend, how the power ratio compared to the 75%.

And secondly on the Life, I take your comments early. Just looking at Life Asia Pacific in particular, what was that - it was nearly 100 million in H2, but lot stronger than it's been before, I'm just wondering if you can comment on that specifically was there any one offs and buyback going forward?

Thank you.

Peter, thank you. So we want to acquire a few underlying and adjusted number, but I'm a dumb one on that, yeah.

If you look at the numbers and you look at history, I think you can see the - the realized gain component can be plus or minus quite a lot depending on what's happening on the asset allocation. For the thing that which standard has been an obvious one off in the result as expected, it did not involve the impact of tax reform in detail positions we have.

So you maybe got about $219 million, I think trying to normalize the asset, it's really quite difficult given the nature of the things that drive, yeah. I think we're trying to take a longer term view, we expect BOP and the NIAS line and typically NIAS will be slightly higher because of course there we pick up the spread beyond the - other returns beyond the coupon that we achieve within BOP.

On the second question on new business value, it's generally been a very strong year for new business value in Asia. We've seen both Japan and Australia perform strongly, I mean different drivers in the two different markets.

I mean for Australia it's the growth of the overall portfolio. That's mainly driven of course by the fact we'll be bringing on an enquiry and a transaction after that acquisition a little more than a year ago.

And Japan is different, we went back in the early part of the year to look at how we assess the profitability of some of the products in their radars and based on the experience that we've seen the fundamental post of view, so we've left it the view of profitability and nowhere of substantial one offs.

Okay, does that - is that thought for as the new business that is outside, can you talk to that [ph]?

So from a BOP perspective - so for example on the new business value topic around Japan, I mean that will have had some small pose of impact from BOP that is more one off in nature. That's not a substantial number than the overall Life performance.

Thank you, George. Just quickly on the first point, I guess I sort of understood the dividend policy was really driven by your underlying net income.

It sounds like this year it's more [indiscernible] on the specific payout ratio and the payout ratio would apply more going forward, would that be fair?

Not quite on the - so what we did in the conversation we had with the board actually only yesterday, we build up model of - we start with the operating profit and run through to what we think the equivalent and NIAS number would be. And we take a - I think we already explained, we would expect to feature to things like impact of restructuring, the things we've talked about already and the operating profit and we look to the totality of all of the other movements to try and form a conclusion as to whether we think that there's another item we should exclude or not.

And the only significant adjustment I made to this model of NIAS number board was to not realize gains turning to a number at this point more consistent with a longer term expectation on the figure that you see on the results today. This was a qualitative position, this was a hard decision based on a combination of what we think we achieved last year and actually more importantly what we think we're capable of achieving this year.

Okay, thank you very much.

Thank you. Good afternoon everybody.

I have a few questions please. Firstly, just wanted to come back to the loss ratio improvement, so George well you insisted on BOP and ROE were the same as one, which you have taken out for 2017 through to '19, if I compare that with what was given at the time of the Investor Day, there was more point height of one point of loss ratio improvement coming through planned by 2019 from the Investor Day, that's now 50 basis points from 2017 to 2019, so it's come down a little bit.

I guess when I look at the accident year loss ratio improvement that has improved by one point over that same time frame, which is roughly what I would expected over the whole planning period. So my question on the loss ratio is, are you running ahead of what you were planning there?

Are the loss losses resorting to that number still in any meaningful way? And secondly on the ROE topic itself, so you're kind of gapping away from this 12% BOP, ROE number target, which actually hasn't been changed even though we have the US tax reform and also you've been deploying capital for acquisitions.

You got 14% target by 2019, but that includes extract from build of equity in particular supposing you do something about. So my question really is, is that an appropriate target level, I mean 14% should presumably be rising as you deploy surface capital.

Is this a number that's going to come down at the time or is it kind of a flow, how should we think of the volatility on that going forward? And then finally just a quick on the efficiency side of things, so you're half way - more than half way ahead of the plan for 2019, anyone can hit an expense ratio target if they pull back on certain discretionary spends, you want to shed any insight into what you'll discretionary spend on digital and data and other initiatives has been and whether you've actually been curtailing to that in anyway please.

Thank you very much.

Yeah, wow. I thank you, but the answer is short first of all.

So on the loss ratio improvement I think you're right.

It won't be shorter than the capital target. It won't be shorter than that for the loss ratio improvement.

I think you're right on the analysis of the comparison of where we are, so what we had put up on the slide back at the end of '16, but I think everyone can see from - what I told you to expect and what we've actually delivered were short against the expectations on the P&C performance and we still have work to do there. So I think the - we're still targeting to get it to 95, 96, expenses are still the biggest part of that.

We have made a lot of improvements I think maybe more than the 98.2, but necessarily suggested a - we look at the commercial performance and then we appreciate it's a difficult market. We want more.

We want to create our confidence capital investment other than this and James Shea and the team are well aware of that and they're working on it. On the ROE topic, I think maybe an important point to make is that when we did the - again we did the investor presentation back in November of '16, we said more than 12, so maybe that should be cute, but I think the - we certainly had 13 written on the slide somewhere and so I think the expectation was that we start slightly over 12 and we drive at higher over the period.

We're resisting to temptations simply to rise up on the target. I think it's important that we try and maintain integrity of what we said at the beginning.

I think we can all see that from a combination of - the progress we've made so far, what we're going to around the Australian acquisition and most recently the impact of US tax reform. Simply, mathematically that won't make a performance better than the ones that we had planned for.

On the exit drag set of things, so we've left that in the chart. We're handing back in the form of the dividend under the anti-delusion share repurchase and as a chunky piece of capital.

Last year we also invested quite a bit, it's important to remember that almost $3 billion, let's see what happens there. We maybe want to use capital wisely.

We don't intend to do anything that's - not necessary to put shareholders under no pressure from us before and expected to do something stupid. We had to find a way to use it, are we looking to returning it, I mean simple as before.

On the efficiency, I think - maybe I take issue that anyone can have a expense target - very few people could have expense target. Again I think if I run you a bit through the history, what we've done here, I mean we started with the easiest stuff.

Discretionary was the first thing that Mario asked us to tackle when he arrived back in February '16, just to get better financial organization, a little long path discretionary and in fact on the technology side of things, a large part of what you see by way of restructuring last year and you see this unusual thing what we call the restructuring charges and NIAS profits and BOP. The reason for that is that some of this is us investing in technology to reduce expenses in '18 and '19.

So I don't think we've done anything that is not sustainable around expense space, in fact if I look around the organization I think we operate far more effectively to be lighter and I think we can take that a bit further still as we achieve the remainder of the goal. And it's not driven by a starving investment in digital side, it's quite the opposite.

Okay. Thanks very much, George.

Hi, there. First of all thanks for the dividend increase and just moving to the questions, the commercial lines unit, I guess I have hopes that you could improve the attritional performance there in '17, given all the issues that you were tackling.

I'm a bit surprised it deteriorated by maybe two points. Could you just talk, where exactly all the problem books, is it US, is it - it looks like the partly call it Europe I think, is it - a lot of liability of financial line, are talking about a couple of lines with disproportionately high combined ratios?

I appreciate you're still trying to improve it, but I think the degree of improvement was disappointing in '17. Second question tax, what were the negatives from US tax reform, are you going to have to keep P&C business onshore US and would that affect fundability ability towards to treating cash et cetera and related to tax, what's the current long term tax rate of the group going to be?

I think part of the reason the group tax rate is still high is because of weak P&C profitability in Europe. Imagine that was normalized underlying for US tax rate, what would the kind of ideal time line be along those tax rate kind of be for the group and the follow up is just a clarification thing, on the anti-dilution, is that an ongoing - I appreciate that you're doing some historic catch up on the next couple of years of options, but is that an ongoing commitment as far as employees erosions are concerned?

Okay, thank you Andrew. So yeah, we accept that we share the disappointment on the commercial side of it.

I think if you look at what drives it, I don't see that we have new issues. I think we have some of the same concerns, auto continues to be a problem.

I think if you look at it - maybe if you look at the rate entry it shows up because the most attractive line of business bombarded from a rate perspective, but unlike a retail also in the US we don't see the change in plain trends the retail side has been experiencing. So the improvement there has been far slower than we had anticipated and we do intend to take action that runs much capital in the allocation of that line of business to drive a more rapid improvement.

Besides that we had issues back in '16 around financial lines, but still some of those mainly Europe in 2017, but the issues overall are not different. We're trying to drive the necessary return that we have here, so we're focused on it and I do expect some improvement.

Mario?

Yeah, can I jump in because I hear you and I don't disagree on the results, however, I think I always, always repeat that these are big folks and they don't change when you're from other. The issue is the book composition, you move it year after year which is what we're doing and the books are getting better and the books are moving in the right direction, but it takes years.

It wasn't as simplistic as it was that one chunk which was underperforming. If you run with high 90 combined ratio, it is because of book composition, I mean, the Zurich underwriters are not more stupid than the underwriters and actually I think they are skilled and prepared.

In order to achieve a better combined ratio we have to compose the books in a different way, which is what we started in '16, we progressed in '17, now we are going to have the compounded effect of two years plus the new business of '18 kicking in on the year end results of '18. And this will progress us towards the targets that we announced.

So, I wouldn't be that negative also, I understand and of course and I agree on what you say, but bear the perspective please, that we are shifting the book composition towards short-tail lines, towards different. And, if you look at the new business development of '17, that clearly shows it.

And this will start producing gradually year-after-year the results that we are looking for.

On the tax, negative from your saxophone, so we begin to everyone's benefit, we clearly have a change in the rates. We have an element of the structural change which is penal for cross border transactions.

And of course, that's for dramatic from a global insurance perspective because we like to carry risks back to the most of the capital which is back here at home. We took steps as of Jan1 to change some of the income structuring and that means we no longer have the same quarter share in place from the US.

That will slowly build premium volumes in the US overtime and of course we have to carry capital to support that premium volume, alright. Not everything is precisely clear at this stage, so with that caveat, but at this point we would anticipate that by and large any negative cash fundability issues will be financed by the positive cash issues that this thing also generates.

So, over the next say two to three years one will finance the other and it then once we're fully financed the capability to hold more the risk locally will get a pickup and the group's overall cash flow. But in the short term, one finances the other.

On the anti-dilution topic it's our intention that this will be something that we will do consistently in the future.

And the long term tax rate.

Oh sorry, long term tax rate, so the - we've talked before of the 29 type rates. I mean this is three point improvement over that of long time perspective and maybe even a point beyond that.

Right and the 29 though is still flatted in relatively low profitability P&C business?

I mean, you mentioned there's a mixed issue in it that the –we see more of a contribution come from example from Farmers disproportionally because of [indiscernible] from Latin America with a rate pretty much higher. I think that will be a shift as we would still have profitability in some of the European markets and the biggest impact will come from the tax reform.

Okay, great. Thank you very much.

Thank you, good afternoon. First question back to ROE slide 9, you saw the new walk which is as you said 1 percentage point higher than the previous one.

And I wonder with the LT targets being 975 to 1425 and the cash target 85 to 10 billion, is the management confident enough to sign up to higher targets now because it strikes me that what you are planning for is exactly in line with the upper end of the current LT targets? That's the first question.

Second one on Farmers last year double digits loss in policy influence was more than competent that digit rate increases. What do you think is the outlook for Farmers, price increase is still setting off policy losses in '18 and '19 or is there risk you see actually shrinking top line of Farmers, one surprise included in US motor flatten off?

And the third one is may be on Life, you show on slide 20 there that on an underlying basis you think that profits are up 22% with investment margin up 16%. Some of your peers have all the reporting as on Life numbers and have said that this was mainly driven by benign capital markets.

I wonder is 1.4 billion the new run rate of Zurich or would you also say that there's a 100 million, 200 million from just very benign capital market in 2017?

Thanks Thomas, so on the alternate topic - first of all we don't say our own targets relative. That's the decision that the board and the sales make, we present the plans for the board and the board decides how they watch the management.

I mean I think we made it clear already that there are things, as we come forward we need to look in to targets, for example, the acquisition of ANZ Life business Australia. It's something that we said we did because that was less targeted but obviously it doesn't have an immediate impact like known.

But I think the selling overtime given the proof that we have, I think you would expect that we would be challenged by the board on this topic, but we don't set those targets, the board does. On the Farmer's side of things, the message we are trying to get to is actually pretty positive.

If you look at the key metrics around the business both from a top line underwriting possibility perspective, if you look at some of the leading indicators that the team used to judge in what would expect to see in future, most of them point positively. We've achieved mixed changes, changes here have achieved a very significant improvement in profitability which as you point out is rate driven.

We look around the market, should we think it's competing with Farmers in that particular customer segments and we think that the entire segment of the market is going to continue to push for further improvement. If you look around certainly around some of the mutual's I mean you don't see very substantial underwriting losses.

So, we expect next year to see growth in the Farmer's business together with further improvement in the profitability for the exchange. On the Life side of things I'm not sure I would say much more than I said to the earlier question, I mean where do we see the BOP run rate.

I would take the headline number at a low for something like mid single digit growth rate and then to the extent that - anything that is benign or favorable. I mean, that's incorporated in that guidance.

Okay, may be a quick follow up on Farmers with the US tax reform, to what extent do you see at Farmers or Farmers mentioning a price competition as local peers price in the lower tax rate?

I think you've got - the most important thing here is that we see different segments of US auto market. And I sited already there are - varied price, competitive segment price seekers as we describe them internally.

They are typically well said by other providers in the market, so they already is price competition and this wouldn't really change things naturally. You think another segment, which we talked about and you heard already I think from Jeff, Mike and Roy back at the Investor Day in November.

What we see - price is not important, this clearly tells something that there's an important decision driver, but the extent to which serve as meeting customer expectations, providing all the service necessary and that's another important part of the decision process. I think the challenge overall, if you look at the US market, particularly the companies we serve in this particular part is that profitability is still a bit challenged.

So therefore, you can give - you can put tax conflicts, but if you're not making enough profit, it doesn't really change the equation markedly. So I still expect based on the conversations I've had with the Farmers team that we will see more rates to come in this business.

Alright, thank you very much George.

Fantastic, thank you very much and really well done. What you've done is really good today.

I had a few questions, on the Farmers group, if I can put it in that way, so the surplus did not change in 2017, 5.5 billion. Given what you were saying in terms of Farmers profitability, what could we see there in terms of - what's the normal run rate given your expectations of profitability now?

The surplus increase by 5% or 10%, I don't know, [indiscernible]. And the reason I ask for that is then we can put some of the same multiples in those area should be very nice.

On the cash flow, the 3.7 billion, did you say what the figure would be if I kind of normalize everything and I have no idea what I should normalize, so I imagine you've got hurricanes, I imagine you've got your tax, but at least my imaginations are not 100%, but the figures and I expect it to be lower because I'm just wondering drawing back anything. If any fire back the 10,000 million it's an amazing figure.

And then just maybe little details, in the one offs you addressed for your lovely figure about 4.7 billion, what was the adjustment for what's highest and can you give a figure for that? I think mentioned a few times that financial reserving I think with Spain and the suspect is the thing which drives your combined ratio higher.

I can't think of anything else. That's it.

Thank you so much.

Thank you, Michael. So on Farmers, Farmers - besides giving you a precise number because they are very depending on interest rates.

Typically this change is targeting high 90s combined. They believe that somewhere in that range allows them to generate enough surplus to grow the types of target level that we've seen it focused on the core operations of Farmers.

So they're not looking for a 90 combined, they're looking for something in the 98, 99 types. On the cash flow side, it looks - so first one is from the CAT, so the natural catastrophe - they actually have a quest of all in place and they've gotten yet, maybe a couple of $100, maybe really the minimum.

We do have some one off, I find the most obvious example would be the readjust transaction we did around Summerdale [ph] back in the middle of the year, that released maybe a couple of $100 million. There are few other small things that are one off in nature, typically positive more than negative.

I think if you normalize that that would be a bit lower than 3.7, but it will still be slightly above the run rate required to deliver more than 9.5 billion over the planning period. But you certainly can't hope by the 100 or at least 3.7, I'd love to do that, but you can't do that.

Just on the 3.7 because you have the funding, not the funding, but the reallocation of restructuring cost, is the 3.7 mix of that?

No, so the restructuring isn't. So remember when we set the - I don't actually remember that.

What I try to say, when we set the 9.5 target, if you think back we had delivered more than 9.5 over the prior three year period and there's a big discussion about the quality of that and the reality is that allowed for that restructuring cost that we intended to or expected. And your lost one about one offs, so the challenge here is, we could push that a couple of hours and there will still be, I could point out maybe 100 different models still going different directions.

On the cash side, we picked on the hurricanes because that's really the story of our ATO and roughly where you expect us to be, give or take and we picked the other. Hope you think one which I think people knew about it, one of which were known things to do, one being the restructuring and operating and the other being the UK topic.

There are impacts from wild fires, but had some hurricanes, there was an expectation. There are impacts in the commercial around financial lines in Europe, but I think that topic - only if we think of the good news, but then try and make an argument we should take out the bad news, between the rest of it is a wash and the combined ratio in particular, the number that you've seen, they're reasonable representation of where we are.

We need to work for improvement.

Thank you very much and really well done, thank you.

Yeah. Hi.

Thank you for the questions. Just a quick question on investment income, can you just comment on the trajectory of that investment income and where we are in terms of bottoming of that, particularly given the right environment, the moving right environment?

And then secondly just on deployment of capital line, obviously your P&C book has move up, which gives you some flexibility, Z-ECM looks very good and SST looks all good. So in terms of areas of deployment for M&A, what areas would you look at and would you necessarily use M&A to accelerate the shift in the P&C book that you're talking about.

Thanks.

Yeah, thanks Johnny. So on the trajectory; I had two comments to make here.

So we think we comment to what we expect to be the last year of investment income compression. If we compare the big yields to the investment yield, we got 20 basis point gap or 20, 30 basis point gap on the P&C book.

We guided people to assume we will be then benefited by that $50 million to $100 million. On deployment of capital and again I need to stand at disclaimer first of all, we have no need to do M&A achieve the targets.

I think it's important to emphasize that - all the things that we've talked about in terms of the outlook for '18 are - with the exception of Australia transaction which is now something we're looking to complete, everything else is organic and everything that's in BOP and ROE is organic. Having said that, we clearly have the capability of this funding there that makes sense and we would like to move the balance of the book, not so easy to do it given the pricing of some of the assets that you might look to go on to do that.

I think other priorities would be things like bank issuance, maybe we think we have the core competency there if we can do more of that, but we certainly deploy capital in support of it and then generally we made the point that as we look to solidify the organization and focus the organization in fewer markets where we have strength, I mean if we have the ability to put capital buying, management teams are doing a good job and a market where it can be more relevant. That's obviously a topic that will also be on the agenda for us.

Okay, thank you.

Hi, guys. I had three questions, just still trying to hit on the commercial deterioration it's whether between '17 and '16, so I think you should be on your own plan and this was kind of appreciate going in the right direction.

Is the problem that you weren't aggressive enough in cutting some of these lines and maybe because you have an expense target as well as a loss ratio target, do you basically are now looking at again to cut these lines more aggressively on commercial auto or if that was going on here and we can now see kind of a reduction in the top line significantly for the commercial business line to share? And then the second question is on the retail line, could you give the kind of X CAT [indiscernible] because on that slide you're saying X catastrophe and obviously if I say a particularly good weather experience, have you stripped that out from there or what would that look like you splitting that?

And the final question is on Farmers, I mean I still don't really get the message to the forward looking indications of Farmers oppose to because the key for new business looks like it's a number, looks like it's still 17% lower than it was three years ago, which kind of feed through. Are you seeing an increase in the net growth in the Asian accounts or am I missing something that is obvious in there that is positive?

Thank you.

So on the first point, if I have said in this call I thought commercial was plan, I apologize. The teams are working hard to improve it.

It's causing movements still hard to do. I don't think it's because we stopped the investment or we tried to focus on the expense ratio, it's a tough market and there are issues that affect not only us but other members or other market expense.

We're now on plan, we look to improve further and we expect to see that this year. On retail other X CAT, it's not a key performance indicator that I focus on.

In fact, when you give you X CAT numbers, we tend to exclude X CAT even for growth on cap to growth. So if you're going to exclude retail that lies with growth fund result, maybe I would exclude commercial auto the same time because one is the by far on the other side of the outcome, but the other is the other way.

On that point, I'm just trying to working out what the improvement was?

Sorry, can I make clarification. We don't exclude CAT.

The only cause for not including in the normal definition of the run rate of the business is three events in North America, which are very extreme events that's it. We include everything else.

We take every earthquake, every flood, every storm, everything, whatever in the world. We just say that three events in America for their brutality and for the fact that they came all on top of the other in three weeks they're quite special and they should be considered on the side.

Everything else is included with the remaining included and will always be included.

On Farmers Andy, I think it's safe to say that it's going to take some time before you and I will see Farmers the same. I look at the improvements that we're seeing from a profitability perspective; you see it clearly on the combined ratio.

I look at the impacts on the top line and you can choose out of the core growth and the all in growth. And on the indicators, I appreciate that some of them are - maybe the best way to term, it's slightly less negative than they were before.

When you look at the trends and particularly when you at customer satisfaction which we see as a really strong maybe indicator where the business is headed as Mario mentioned in the introduction, we have a very strong performance from Farmers at the end of the year, that we were happy with what they're doing, we're happy with you can see evidence of the progress, we expect that to continue.

Okay, thank you. So the question about the - just to get a feel to how much has improved by it - that was 94.8 going 92.9, just wondering how much of that was the crop business?

The crop is at roughly the same level of profitability that was last year.

Okay, also very helpful. Thank you.

Yes, good afternoon. Thank you.

Just one question is that when you see rising interest rates and obviously - is there a temptation within the group at some of the portfolio mixes should probably be differently done or - because ultimately when the investor day plan was launched the rate far lower and it obviously a consideration rates would go far higher from here or the hope is. So I'm just curious how you look at this dynamic or how your teams look at this dynamics.

Just on the slide 18 again, sorry to ask, just a clarification the EMEA movement, is there some effect of wage inflation or those kind of things because wage inflation being a topic even in Europe. Just want to understand your view there.

Thank you.

On the first one, rising interest rate Vinit, so maybe I'll start away from interest rate and just talk about on stands on asset risk, so maybe just being through the planning process this summer and Urban our CIO is recommending no major change on our asset stand. I think as you guys know we had slightly reduced exposure about a year ago and since then we've been broadly consistent and at this stage we're anticipating a further significant shift.

On the interest rate topic in general, that's typically more of an issue that feeds back into the pricing of the costing mechanism that we use. So we did see a change in the risk free interest rates and that's something that was on the view of what hurdles that to be achieved would be, but not necessarily a change in portfolio mix.

So SAE is a strategic allocation for us anticipates to be broadly stable.

Sorry, George. I meant the long-tail versus the short-tail; I mean the business not the asset.

On that again I think we made a strategic choice, but we think with two of our weight on the long-tail side of things. I think the interest rate is something that is fed into that decision already and the view that that creates around things like inflation risk in the long term.

That's a topic you'll continue to see as where can steps and already this year we talked about that but reinsurance could be a spec in the right direction here and we have placed reinsurance program to shift the mix of the portfolio, but we also intend to work on the business side of the book to emphasis more the short-tail lines and trying to achieve a bit more balance in the portfolio overall. And then your last question was about - is expenses a big driver of the picture that you see 18, particularly Spain and Europe and short term rate, unfortunately that was mainly driven by loss ratio.

Alright and that's also motor as you mentioned in the call already?

Motor tends to be a tough market pretty much everywhere. It's going to contribute to, but a larger contributor in '17 would be financial for example.

In EMEA?

Yes.

Okay, alright. Thank you, George.

Hi, good afternoon. Just two questions, one, could you update in terms of reinsurance program if that's changed and secondly on the SST framework you seem to point out to the reserve risk change which has led to the ratio coming down by about 10 points.

Could you say a bit more in terms of where it's coming, Life, non-Life, what's changed here? Thanks.

Yeah, thanks Dhruv. So on the reinsurance program, I think the only piece of substance that we renew on the cash side is the BOP and aggregate CAT.

No major changes in structure rising it slightly up as you would expect I think on the market conditions. On the comment on the SST plates, that was really to reflect the process when we're going through a SINMA [ph] as they review proposed models and either approved or either ask for changes.

I mean one issue where they indicated that they don't want to see change before they'd be satisfied [indiscernible] on the P&C book. I mean we've estimated these lines and we anticipate from that and as you can see overall at this stage we still expect the SST ratio, when we publish it in April to be above 200 and that's a very comfortable position for us to be in.

But that comment really reflects the ongoing conversation with SINMA and their expectations around how this should be modeled.

Alright, thank you.

Hi, guys, Ralph Hebgen from KBW. I just have one question which is left and that relates to cash to gain on slide 34.

I just still like to get bit of handle if possible on the components of the cash which you say. So first George you mentioned a one offs, but in particular in Life.

I mean Life is very strong at 1.1 billion shown here on slide and I remember that your set of guidance was to expect about 500 million or so from cash on annual basis, so that is my first one on the cash. And the second one is I pick up that you're saying that the NATCATS [ph], of the NATCATS there is only about 200 million or so in this, so if it is the case that only 200 million of the claims which you received on cash effective this calendar year, is it therefore a fair conclusion to say that 500 million of cash negative impact will come into this calendar year.

So very nearly on the second one, so really at the low foot tanks, so we look at the cost of tax walls of direct 600, so maybe another 400 impact from cash to come in the dividends that the business has declared at the year end. On the first one, obviously one of the things that has changed since the point at which we gave the guidance around say $500 million per annum, a large part of the Life business is European based.

Solvency II does make a difference to the expected cash flow and that certainly helps and of course the one off, I mentioned in response to Michael's question around the deal, it's also sitting in the right number.

Okay, that's cool. Thank you very much.

Okay, thank you very much, everybody, for dialing in.