IFRS 17 at Zurich

GROUP

Key messages

No major impact given nature of our business

Shareholders' equity

impacts

Limited changes for P&C

Improved Life disclosures

Farmers largely unaffected

Cash and capital generation remain strong

© Zurich

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

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

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

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

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

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

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

APPROACH

GROUP'S GENERAL RULE:

EXCEPTIONS CONSIDERED BASED ON:

ELIGIBILITY ASSESSMENT:

P&C insurance

Life insurance2

PAA1

Used for ~99% of P&C GWP

BBA/VFA1

Used for ~75% of Life reserves and investment liabilities

• Contract boundary
• Management approach & KPIs
• Current accounting practice and actuarial methods/tools
• Materiality and operational considerations

• Not needed for BBA approach (IFRS 17 default model)
• Needed in order to adopt the simplified approach (PAA)

© Zurich

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

RISK ADJUSTMENT

EQUITIES FVTPL4

LEVEL OF AGGREGATION

TRANSITION

APPROACH

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

Optional exemption not applicable outside of the EU