Swiss Re Ag · SIX:SREN
Swiss Re — H1 2004 Earnings Presentation
29 slides from Swiss Re's earnings presentation, Aug 26, 2004
Slide 1: Analysts' meeting, 26 August 2004, London
ab Analysts’ meeting 26 August 2004 30 St. Mary Axe, London ab Agenda Executive summary Coomber 1H 2004 results and business overview Godbehere Strategy and outlook Coomber Q&A All Appendix Analysts' meeting 26 August 2004 Slide 2
Slide 2: Cautionary note on forward-looking statements
Cautionary note on ab forward-looking statements Certain statements contained herein are forward-looking. These statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-
Slide 3: Executive summary and target matrix
ab Executive summary I Net income more than doubled to CHF 1.4 billion (EPS CHF 4.66) Total premiums down 2% (stable at constant exchange rates), focus remains firmly on profitability Property & Casualty: operating income up 79%, strong improvement in combined ratio to 96.1% Life & Health: operating
Slide 4: Target matrix
ab Target matrix Annualised return on equity of 15.6% Updated for Financial Services targets Business Avg target Group Key figures 1H 2004 2004-2006 Property & Combined ratio 96.1% 96% Casualty Premium growth -4% 5% Life & Return on operating revenue 8.6% 9% Health Operating revenue growth 1% 7% Fin
Slide 5: Income statement and investments
ab Income statement Net income more than doubled to CHF 1.4 billion CHF millions 1H 2003 1H 2004 Change Change at Revenues const. FX Premiums earned 14 382 14 142 -2% 0% Net investment income 2 442 2 436 0% 2% Net realised investment gains/losses -26 659 n/a n/a Trading revenues 221 277 25% 26% Othe
Slide 6: Property & Casualty
ab Property & Casualty Strong underwriting performance Operating income up 79% from CHF 822m to CHF 1 474m Combined ratio improved from 99.8% to 96.1%, driven by good underwriting profitability and a low level of large claims in the first half of the year Overall 4% reduction in premiums earned due
Slide 7: Split of non-life claim reserves
ab Split of non-life claim reserves Substantial reserves in excess of client notifications Split of non-life claim reserves by case reserves and IBNR (as of 31.12.2003) CHF billions 50 In US liability IBNR reserves are more than 150% of case reserves 40 Split for total liability book 30 above 100% F
Slide 8: Life & Health
Life & Health ab Capital invested in Admin ReSM in first half equals full year 2003 Value added by new business rises as IRRs and duration increase CHF millions 2002 2003 1H 2004 estimated Capital invested in new Admin ReSM business 503 524 524 Capital invested in new traditional business 1 922 1 10
Slide 9: Financial Services
ab Financial Services Premium business generating sustainable earnings 1H 2003 1H 2004 Main drivers of change Premiums 1 555 1 585 Growth of 5% (at constant forex) largely CHF millions driven by: - controlled new business in casualty - growth in credit and surety - partly offset by aviation - proper
Slide 10: Strategy and outlook: current strategic initiatives
ab Strategy and outlook John Coomber Chief Executive Officer Analysts' meeting 26 August 2004 Slide 19 ab Current strategic initiatives I. Actively manage the cycle for profits II. Optimise organic and transactional growth III. Extend leadership position in Asia IV. Accelerate the balance sheet thro
Slide 11: Accelerate the balance sheet
ab Accelerate the balance sheet Historic approach towards risks: «buy and hold» Swiss Re BS Capital Portfolio markets Risk Solvency Reinsurance Capital Current approach toward risk: «securitise peak risk» Peak risks Swiss Re BS Capital Portfolio Risk Solvency markets Reinsurance Capital Ambition: «a
Slide 12: Outlook
Outlook ab Total return portfolios supported by active gains programme Fixed income Total portfolio investment yield*) income 2003 1H 2004 2003 1H 2004 North America J Life & Health 6.3% 6.1% 7.6% 7.0% J Non-life 3.6% 3.0% 5.0% 4.3% Rest of the world 4.2% 4.0% 3.2% 5.9% Total 4.7% 4.5% 5.1% 5.8% *)
Slide 13: Questions and answers
ab Questions and answers Analysts' meeting 26 August 2004 Slide 25 ab Announcement of investors’ day 26 November 2004 Focus P&C business and risk adjusted capital Analysts' meeting 26 August 2004 Slide 26
Slide 14: Appendix: Target matrix, previous basis
ab Appendix Analysts' meeting 26 August 2004 Slide 27 ab Target matrix Previous basis for Financial Services targets Business Avg target Group Key figures 1H 2004 2004-2006 Property & Combined ratio 96.1% 96% Casualty Premium growth -4% 5% Life & Return on operating revenue 8.6% 9% Health Operating
Slide 15: Income statement at constant FX; cash flow
Income statement ab 1H 2003 at 1H 2004 FX rates CHF millions 1H 2003 1H 2004 Change Revenues Premiums earned 14 168 14 142 0% Net investment income 2 392 2 436 2% Net realised investment gains/losses -73 659 n/a Trading revenues 219 277 26% Other revenues 113 140 24% Total revenues 16 819 17 654 5%
Slide 16: Shareholders' equity and return on equity
Shareholders’ equity further ab strengthened CHF 0.9 billion in first half CHF millions 20 000 1 441 -341 -92 -10 27 -150 19 386 18 511 17 500 15 000 12 500 10 000 31.12.2003 30.06.2004 Net income Change in unrealised gains/ Purchase/sale of Analysts' meeting losses on securities, net treasury share
Slide 17: Change in accounting guidance; investment result
ab Change in accounting guidance Embedded derivatives recognised for certain modified coinsurance arrangements and funds withheld contracts Variable Interest Entity (VIE) guidance now applied to VIEs created or acquired before 31 January 2003 Own shares now treated as treasury shares and movements a
Slide 18: Net investment income and realised gains
Net investment income ab 1H 2004 vs 1H 2003 Net investment income increased by 2% currency adjusted. Interest income on fixed income holdings increased by 12%, driven by larger volumes, while dividend income decreased 1 H 2003 2003 1H 2004 Variance Variance at 2004 as reported at constant CHF millio
Slide 19: Unrealised gains and losses; total investments
Unrealised gains and losses ab on and off balance sheet Net unrealised gains on fixed income securities decreased by CHF 0.9 billion to CHF 0.3 billion reflecting rising yields (approx. 60% of decline is on the duration matched life and health portfolios) CHF millions, pre-tax 2 449 890 Off BS 1 406
Slide 20: Corporate bond portfolio by rating
ab Corporate bond portfolio by rating The exposure to corporate bonds remains focused on the higher quality ratings and has increased since December 2003 due to the inclusion of assets acquired in transaction with CNA and reclass of ceding company deposit investments Rating split of corporates Ratin
Slide 21: Non-life combined ratio; reserve ratio impacts
Non-life combined ratio ab for 1H 2004 of 95.8% CHF millions Property FSBG Total & Casualty traditional Premiums earned 7 527 1 389 8 916 Claims and claim adjustment expenses -5 191 -968 -6 159 Acquisition costs -1 696 -262 -1 958 Other operating costs and expenses -350 -78 -428 Combined ratio 96.1%
Slide 22: Property & Casualty operating income
ab Property & Casualty Operating income up 79% at CHF 1.5 billion CHF millions 1H 2003 1H 2004 Change Change at const. FX Revenues Premiums earned 7 864 7 527 -4% -4% Net investment income 672 691 3% 2% Net realised investment gains/losses 133 493 >250% >250% Total revenues 8 669 8 711 0% 1% Expense
Slide 23: P&C combined ratio by line
ab Property & Casualty Combined ratio improved 3.7 points on 1H 2003 Premium split by line 1H 2003 2H 2003 1H 2004 Main drivers of change of business 13% Property 90.3 % 72.9 % 69.2% Good profitability and reserve 4% releases (CHF 247m) 34% Liability 105.8% 125.0 % 119.6% Reserve strengthening for U
Slide 24: P&C premiums earned by line of business
ab Property & Casualty Premiums earned by line of business In % of total 100% The property and liability 16% 13% 4% lines showed solid 80% 7% underlying growth with 17% liability also benefiting from 18% rising prices 60% 32% In motor, a large non- 27% 40% traditional quota share was renewed with a
Slide 25: Underwriting steering values; Life & Health results
Property & Casualty ab Underwriting steering values Underwriting steering values Required premium realised vs. required premium Target econ. profit incl. all relevant pricing - renewal-specific elements - average over cycle in economic terms, ie net Capital costs present values Internal costs assess
Slide 26: Life & Health premiums and Admin Re
ab Life & Health Underlying growth reflects investment in Admin ReSM CHF millions Premiums Premiums 1H 2003 4 963 Foreign exchange Foreign exchange -112 Growth in in Growth Admin ReRe Admin SM 169 Growth Growth in in traditional traditional business 2 business Premiums 1H 2004 Premiums 5 022 Analyst
Slide 27: North American pricing; Financial Services results
ab Life & Health Update on North American pricing initiatives Swiss Re has continued its pricing initiative to review, on a client specific basis, the pricing of all open treaties in North America The pricing review reflects both current economic environment and client specific mortality experience
Slide 28: Financial Services revenue and premium business
ab Financial Services Revenue growth for premium and fee businesses CHF millions 0 500 1 000 1 500 2 000 2 500 Totalrevenues Total revenues1H 1H2003 2003 2 124 Foreign Foreignexchange exchange - 56 Premium Premium growth growth 77 Fees&&trading Fees tradingrevenue revenue 64 growth growth Fees Fees
Slide 29: Financial Services: CMA risk management and VaR
Financial Services ab Growth in CMA fully supported by best- practice risk management Daily market-risk related revenues vs Value at Risk in 1H 2004 Value at Risk (VaR) Revenue USD millions 10 5 0 -5 -10 Jan 04 Feb 04 Mar 04 Apr 04 May 04 June 04 Daily market-risk related revenue in USD millions Num