Swiss Re AG · SIX:SREN
Swiss Re — KBW European Financials Conference 2013
27 slides from Swiss Re's conference presentation, Sep 18, 2013
Slide 1: KBW European Financials Conference
a KBW European Financials Conference Alison Martin, Head of Life & Health Business Management London, 18 September 2013
Slide 2: Agenda
Agenda L&H Reinsurance is strategically attractive Swiss Re's L&H Reinsurance business Management actions and financial targets KBW European Financials Conference | Alison Martin | London, 18 Sep 2013 2
Slide 3: L&H Reinsurance is strategically attractive
L&H Reinsurance is strategically attractive KBW European Financials Conference | Alison Martin | London, 18 Sep 2013 3
Slide 4: Swiss Re's Group strategy
Swiss Re's Group strategy Outperform our peers Strategic goal: Reinsurance Asset Management The leading Admin Re® player in the Current wholesale position Smart expansion re/insurance Corporate Solutions industry Longevity & Health High Growth Markets KBW European Financials Conference |
Slide 5: Priorities for the Swiss Re Group
Priorities for the Swiss Re Group Strategy unchanged, focus on execution, keeping the pressure on Group strategy Continued emphasis on high growth markets for all business lines Productivity emphasis to control mgmt. expenses at lower levels L&H Reinsurance: ROEs expected to improve to 10-12
Slide 6: Investor perceptions
Investor perceptions Feedback on Swiss Re's strategy and "equity story" ? Frequency mentioned more less Swiss Re investor perception survey, May 2013; in-depth anonymised interviews with a sample of investors and analysts, conducted by Brunswick Group LLP. Unprompted "top of mind" items when askin
Slide 7: The fundamental challenges of L&H reinsurance business
The fundamental challenges of L&H reinsurance business General challenges Current situation Very long tail business where Low yield environment increases coverage periods can be in excess of pressure on reinvestment rate and 50 years investment income Wide difference in regulation creates Pr
Slide 8: There is a strong strategic case for L&H reinsurance
There is a strong strategic case for L&H reinsurance Large amounts of historical data are a key advantage when pricing new business R&D enables better risk selection Largest clients have both P&C and L&H needs High entry barriers Diversification benefit with P&C Re – P&C Re would be alloca
Slide 9: Our generations theme
Our generations theme Focus on four strategically important topics Advancing Funding Managing Partnering sustainable longer lives climate and for food energy natural security solutions disaster risk KBW European Financials Conference | Alison Martin | London, 18 Sep 2013 9
Slide 10: Swiss Re Group: Looking beyond 2015
Swiss Re Group: Looking beyond 2015 Longer-term strategic themes (selection) Management priorities (selection) Risk pool for nat cat grows fast, attracting Capital structure and increasing amounts of management alternative capital Strong growth in high growth markets fuel Profitability demand in all
Slide 11: Swiss Re's L&H Reinsurance business
Swiss Re's L&H Reinsurance business KBW European Financials Conference | Alison Martin | London, 18 Sep 2013 11
Slide 12: Investors' Day 2013 Key messages
Investors' Day 2013 Key messages Swiss Re Group strategy is unchanged – Focus on execution, keeping the pressure on – High growth markets contribution is growing – Productivity emphasis to control expenses L&H Reinsurance is "back in the game" – In-depth review, incl. pre-2004 US business – Conc
Slide 13: We have taken action to improve our performance
We have taken action to improve our performance 1. Completed an in-depth review of all our material L&H business – Global scope down to most granular portfolio level – 9 years retrospective and +50 years prospective analysis – Portfolios with performance issues under particular scrutiny 2. Extracted
Slide 14: New Division established to focus on improving the value of our In-force book
New Division established to focus on improving the value of our In-force book Dedicated In-force Division The new Division will be operational on 1 July 2013 CEO Reinsurance It will control the full value chain after (Christian Mumenthaler) the business is bound, including – Technical Accounting
Slide 15: L&H US GAAP divisional operating income
L&H US GAAP divisional operating income Consistently strong, except for US individual life L&H US GAAP divisional operating income before interest expense and tax1 USD m Excluding the pre-2004 US Individual Life 1'500 business, L&H consistently delivers strong 1,284 GAAP profits 1,201 1,075 Europe
Slide 16: US Individual Life business
US Individual Life business Two major problem areas: PLT and YRT Individual Life business Underlying 10, 15, 20 and 30 year level term products Post Level ("T-10", "T-15", …), reinsured via coinsurance between 1999 Term (PLT) and 2003 Negative pre-tax earnings impact of USD 112m in 2012 Underl
Slide 17: Summary of in-depth L&H business review
Summary of in-depth L&H business review Most portfolios are performing in line with or above expectations Overview Life business: Achieved US GAAP margin vs. pricing (business lines)1 The majority of our life and health portfolios generate substantial US Actual Premium Margin GAAP margins They l
Slide 18: New business
New business Expected to further improve performance Emerging markets Life and Health Re Gross Earned Premiums 2006-2012 USD m New business will contribute to a + ~70% higher ROE over time through several 600 levers: 500 – Poorly performing business running off 400 and being replaced with business
Slide 19: Management actions and financial targets
Management actions and financial targets KBW European Financials Conference | Alison Martin | London, 18 Sep 2013 19
Slide 20: Summary of L&H management actions
Summary of L&H management actions Expected positive impact on earnings, except in 2014 Implementation Management action 2012 2013E 2014E 2015E Liability Actively manage pre-2004 US PLT policies management Actively manage recaptured pre-2004 YRT (pre-2004 US book) Capital Extraction of exce
Slide 21: Summary of L&H management actions
Summary of L&H management actions L&H Re ROE expected to increase to 10-12% by 2015 ROE impact by 2015E Management action (% points) ROE impact estimates do not Liability management ~1% anticipate any benefits from rising interest rates Key drivers are past and present Capital management ~2.5% c
Slide 22: Group financial targets
Group financial targets Well on track ROE 700 bps above risk free average over EPS growth 10% average annual growth 5 years (2011-2015) rate, adjusted for special dividends1 in % in USD2 14.0 13.4 11.9 10.1 9.2 9.6 7.7 6.6 8.0 6.3 8.5 7.9 7.3 7.8 4.2 3 2010 3 2011 2012 H1 2013 … avg. 2011- 2010 2011
Slide 23: Swiss Re Group earnings per share
Swiss Re Group earnings per share We expect to achieve the 2015 EPS goal in USD 11.9 2012 EPS, as published -1.9 2012 tax benefits, reserve releases, US Admin Re® sale 1 -2.6 Interest rates flat, mid-term SAA, asset volume up 0.9 P&C: growth, QS expiry, nat cat margins down, casualty up 1.0 L&H: man
Slide 24: Summary
Summary 1. L&H Reinsurance is strategically attractive for Swiss Re 2. Recent in depth review of the L&H business – Vast majority of the business has been performing at or above our profitability requirements – Fixing the problematic pre-2004 US business is expected to have a negative US GAAP impact
Slide 25: Swiss Re
Swiss Re TT I SWISS RE 150 YEARS
Slide 26: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 07 November 2013 Third Quarter 2013 results Conference call 20 February 2014 Annual Results Conference call 18 March 2014 Publication of Annual Report 2013 and EVM 2013 24 March 2014 AGM Briefing Call Conference call 11 April 2014 150th Annual General
Slide 27: Cautionary note on forward-looking statements
Cautionary note on forward-looking statements Certain statements and illustrations contained herein are forward-looking. These statements (including as to plans objectives, targets and trends) and illustrations provide current expectations of future events based on certain assumptions and include an