Zurich Insurance Group Earnings Call Insights: 2012 Financing, The Refining Side

On Thursday, Zurich Insurance Group AG (OTC:ZFSVF.PK) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

2012 Financing

Theepan Jothilingam – Nomura: I have got a few questions actually just on financing for the 2012. I know you’ve stated you want to maintain your investment grade. Could you just talk about how confident you are that you can deliver a conversion from the press to the convertibles? What sort of timelines should we expect, and is only flavor we connect on sort of financing, should it be more expensive? Secondly, just again you have discussed the scrip dividend, is it fair to assume that major shareholders wouldn’t participate and what sort of assumptions do you make on the take up on scrip? Then, lastly, on the treasury shares, are you in any discussions to sell those treasury shares to a strategic buyer? Or would the plan be at the appropriate time to (indiscernible) into the market? Separate to that, just on 2012 guidance, could you perhaps just reconfirm production guidance ex-YPF for 2012 and also give any color on CapEx for this year as well as ex YPF?

Miguel Martinez San Martin – CFO and Director of Affiliated Companies: In relation with the first one, the first comment is that, yes, we are totally committed to give our investment grades. I think that the timing will go by September – we’ll at the end of September or October, we’ll put the preference on the market. This will be – well, the first step would be the scrip dividend. Then by September we will put on the market the compatible one for the (preps), and finally if necessary we will use the treasury shares, but only if necessary after those mentioned. We think that with the first two we’ll be in line with what the rating agencies are expecting from us, but if necessary we will have the third one. In relation with the profile for next year, it (335 or some above) but they are – I mean we keep with our expectations. Think that along the year we’ll have a small ramp-up in Libya but also we will have Margarita and Kinteroni helping the production to go upward (indiscernible). In relation with CapEx, ex-YPF, it’s going to be €4 billion if you include Gas Natural. Without Gas Natural it would be €3.5 billion.

Theepan Jothilingam – Nomura: Just as a follow-up…

Miguel Martinez San Martin – CFO and Director of Affiliated Companies: Sorry, you asked me also what the shareholders will do with the scrip.

Theepan Jothilingam – Nomura: Yes.

Miguel Martinez San Martin – CFO and Director of Affiliated Companies: Well, I don’t know. I’ll say the only opinion but I’ve made my estimated considering that they would pay cash. So basically I would expect they own 28% more or less of the company, so I expect from the other 72% to capture 50% as conversion in shares.

Theepan Jothilingam – Nomura: Is it fair also to think therefore that certainly for 2012 we should not expect any major asset disposals from the portfolio?

Miguel Martinez San Martin – CFO and Director of Affiliated Companies: No major disposal for the portfolio for sure.

The Refining Side

Lydia Rainforth – Barclays Capital: Couple of question if I could? Firstly, just a follow-up on Theepan’s question. Just adding up those numbers, Miguel, it looks like you’re targeting at net debt reduction of about €2.5 billion. Is that about right? Then just more the operational side, can we talk about the refining side? The increase in operating profit, that facilitates a little bit low given the investments that’s gone into Cartagena and Bilbao. I was wondering where do you see the utilization rate sustain as a whole for 2012 and would that case of thing just working quite as well as you might have liked for that first quarter? Then just finally Libya, can you just give us an indication as to where you are versus pay capacity to that?

Miguel Martinez San Martin – CFO and Director of Affiliated Companies: Starting from the last one. 310 when our peak should be 340,000 barrels, okay, that’s the issue one. In relation with the debt, I mean it’s going to depend much on how things evolve. How many of which percentage of our shareholders would opt for the shares or the cash and also on the treasury in shares. So, we’ll have to go and keep looking at it and we will see, but there is not a clear objective of debt reduction. At the end, what we are aiming for is give signals to the agencies in one hand, in the other keep our ratio shrinking. I mean increasing the cash through the debt. If I will have to make a bet, I will say that I assume that we would be above the €2 billion, because I expect a high percentage of conversion from the convertibles into the bonds and there are perspective the bond is considered by the agencies as capital. So, basically, we can consider that we would be above this figure. The last question, yes, the second one was the refining and it was a little low this month. I would say that Cartagena ramp-up has gone pretty well, but in Bilbao we have some issues. First, the rail strikes; second, we have to modify the diet of the refinery, think that Bilbao refinery is the one that captures all the Iranian oil that we were producing and, we have reduced the consumption of this crude. So you will see much better results in my estimate at least April is showing us better results. But you are right the ramp up is enriched with $2 per barrel we expected, it was a little below, $1.7 approximately.