Swiss Re Ag · SIX:SREN
Swiss Re — Q2 2012 Earnings Presentation
55 slides from Swiss Re's earnings presentation, Aug 9, 2012
Slide 1: Second Quarter 2012 results
Second Quarter 2012 results Analyst and investor conference call Zurich, 09 August 2012
Slide 2: Today's agenda
Today’s agenda Financial performance George Quinn, Group CFO Business update Michel M. Liès, Group CEO Second Quarter results 2012 2
Slide 3: Financial performance
Financial performance George Quinn, Group CFO Second Quarter results 2012 3
Slide 4: Q2 2012 Financial highlights
Q2 2012 Financial highlights Good underlying result Group net income USD 83m – Loss on sale of Admin Re® US of USD 1.0bn – Return on equity 1.1%, excluding sale of Admin Re® US: 14.5% – Group combined ratio 85.7% – Very good investment performance, return on investments 4.5% Good results in Rein
Slide 5: Key figures Q2 2012
Key figures Q2 2012 Corporate Group Q2 2012 Q2 2011 H1 2012 USD million, unless otherwise stated P&C Re L&H Re Solutions Admin Re® items Total Total Total Premiums earned and fee income 2 831 2 159 536 599 1 6 126 5 386 12 334 Net income/loss 717 248 26 -916 8 83 960 1 224 Return on investment
Slide 6: P&C Reinsurance
P&C Reinsurance Strong result, helped by benign nat cat, realised gains and reserve releases Net premiums earned Combined ratio Net income, ROE USD m % USD m, % +18.2% +2.9%pts +86.2% 2 831 717 2 395 78.1% ROE: 27.0% 81.0% 385 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Premiums earned increas
Slide 7: P&C Reinsurance
P&C Reinsurance Strong underwriting track record remains intact Combined ratios in %, premiums and underwriting result in USD m Net premiums Underwriting Q2 2011 Q2 2012 Main drivers of change earned result Property 78.7% 78.9% Better than expected nat cat experience 1 151 243 and favourable prior
Slide 8: L&H Reinsurance
L&H Reinsurance Underlying result below expectations, redeployed USD 1.2bn of capital to Group Operating revenues Benefit ratio1 Net income, ROE USD m % USD m, % +0.4% +1.4%pts -52.8% 2 518 2 527 72.4% 525 73.8% ROE: 248 12.7% Q2 2011 Q2 2012 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Increase in premiums an
Slide 9: L&H Reinsurance
L&H Reinsurance Sources of earnings including variation in USD m 16 -22 -333 -15 -94 525 280 -31 -51 248 186 -26 -1 77 Q2 2011 Tax VA, Net Q2 2011 Mortality / Pre-2004 Changes Other, incl. Q2 2012 Net VA, Tax Q2 2012 net expense pre-2000 realised operating morbidity US business in models & expenses,
Slide 10: Corporate Solutions
Corporate Solutions Growth on track, large losses for the quarter above expectations Net premiums earned Combined ratio Net income, ROE USD m % USD m, % +22.1% +10.9%pts -50.0% 536 99.5% 52 439 ROE: 110.4% 4.1% 26 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Net premiums earned increased Nat
Slide 11: Admin Re®
Admin Re® Q2 reflects sale of Admin Re® US business Gross cash generation Return on investments1 Net income, ROE USD m % USD m, % ROE: -0.4%pts excl. 26 loss on 76 109 sale: 5.8% 4.7% 4.3% -916 ROE: -52.6% -17 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Gross cash generation reflects ROI dri
Slide 12: Value extraction in Admin Re®
Value extraction in Admin Re® Sale of Admin Re® US company (REALIC) Demonstrates commitment to portfolio management Components of total consideration1 and value extraction USD bn – Monetising the value of a capital-intensive business – Unlocks USD 0.9bn of capital for re-deployment across the 0.3
Slide 13: Admin Re® - Gross cash generation
Admin Re® - Gross cash generation Increased forecast 2012-2016 USD m 10-20 20-50 250-330 650 2 180 - 1 900 2 300 1 250 Base case Sale of Base case Capital & tax Operational Active portfolio Aspirational 2012-2016 Admin Re® US 2012-2016 management efficiency & cost management 2012-2016 at April 2012
Slide 14: Group investment result
Group investment result Very good investment performance with prudent portfolio Avg. invested assets1 Return on investments Total return USD bn, basis for ROI calculation % % -0.8% +0.6%pts +3.3%pts 9.8% 123.9 122.9 4.5% 3.9% 6.5% Q2 2011 Q2 2012 Q2 2011 Q2 2012 Q2 2011 Q2 2012 Minimal exposure to
Slide 15: Shareholders' equity Q2 2012
Shareholders' equity Q2 2012 Dividend payment offset by unrealised gains Gov bonds 1.5 USD m Corp bonds 0.3 Sec products 0.0 32 000 Equities and others -0.2 Tax -0.5 31 000 Total 1.1 1 102 31 016 30 000 83 -1 134 1 126 29 914 29 000 30 098 -104 -155 28 000 27 000 26 000 25 000 Common Net income Divi
Slide 16: Group financial targets
Group financial targets Missed in Q2 2012 ROE 700 bps above risk free average over EPS growth 10% average annual growth 5 years (2011-2015) rate over 5 years (2011-2015) in % in USD2 15.3 9.2 9.6 7.7 8.0 8.0 6.6 7.9 7.8 8.5 7.3 3.3 1.1 -0.1 2010 1 2011 Q1 2012 Q2 2012 … avg. 2010 1 2011 Q1 2012 Q2 2
Slide 17: Business update
Business update Michel M. Liès, Group CEO Second Quarter results 2012 17
Slide 18: Swiss Re's Group strategy…
Swiss Re's Group strategy… Outperform our peers Strategic goal: Reinsurance Admin Re® The leading Asset Management player in the Current wholesale position Smart expansion re/insurance Corporate Solutions industry Longevity & Health High Growth Markets Second Quarter results 2012 18
Slide 19: Outperform our peers
...with clear implementation levers Strategy Implementation levers Group P&C: large capacity, differential pricing and industry Financial targets Outperform our peers Reinsurance leading underwriting capabilities L&H: manage in-force book and new product solutions Cycle management Portfoli
Slide 20: Successful 2012 P&C treaty renewals
Reinsurance Successful 2012 P&C treaty renewals Today January April July Price and Volume increase, Price and volume volume both price up slightly both increase increase Strong growth Strong growth Market trends from from Improved market conditions, slightly firming ‐ incremental, ‐ sharply ‐
Slide 21: P&C Reinsurance: YTD 2012 renewals
P&C Reinsurance: YTD 2012 renewals YTD volumes strong, volume and prices up in July Treaty portfolios July 2012 renewals USD 2.3bn USD 2.1bn YTD 2012 renewals (January – July) 107% 100% Treaty portfolio Renewable Estimated 1 July 2012 outcome USD 15.0bn April 2012 renewals1 USD 1.8bn USD 1.4bn USD 1
Slide 22: Corporate Solutions
Corporate Solutions Strategy implementation on track, long term outlook unchanged Today 2011 2012 Consolidation and Growth Outlook start of growth Gross premium grew Growth programme on track in first half 2015: Execution of ~14% from USD 2012 planned growth 2.3bn to USD 2.6bn ‐ Gross premium
Slide 23: Admin Re®
Admin Re® Overview of transformational programme Today 2011 2012 2013 Re-establish business Execute on strategy Leverage optionality Transformation Active portfolio mgmt. and Fully establish and programme launched steering to optimise capital recognise franchise Re-investment into usage and
Slide 24: Summary and outlook
Summary and outlook Positive Group result for the quarter Sale of Admin Re® US business unlocks USD 0.9bn of capital in Q3 for redeployment at higher returns; redeployed USD 1.2bn from L&H in Q2 Successful July renewals with both rate and volume increases; markedly higher treaty volumes than e
Slide 25: Appendix
Appendix Second Quarter results 2012 25
Slide 26: Appendix
Appendix Business segment results Q2 2012 – P&L Return on investments (ROI) Business segment results Q2 2012 – Balance sheet Overall investment portfolio Shareholders' equity Q2 2012 Fixed income securities Nat cat and large claims Government bonds Managing earnings volatility Co
Slide 27: Business segment results Q2 2012 - P&L
Business segment results Q2 2012 P&L Re- Corporate Admin Group Consoli- Total Total Total USD millions insurance P&C Re L&H Re Solutions Re® items dation Q2 2012 Q2 2011 H1 2012 Revenues Premiums earned 4 969 2 831 2 138 536 398 1 5 904 5 157 11 883 Fee income from policyholders 21 21 201 222 229 45
Slide 28: Business segment results Q2 2012 - Balance sheet
Business segment results Q2 2012 Balance sheet Re- Corporate Admin Group Consoli- Total Total 30 June 2012, USD millions insurance P&C Re L&H Re Solutions Re® items dation Q2 2012 Q1 2012 Assets Fixed income securities 58 553 27 852 30 701 4 295 31 131 221 94 200 96 059 Equity securities 1 765 1 549
Slide 29: Shareholders' equity Q2 2012
Shareholders' equity Q2 2012 Re- Corporate Admin Group Total2 USD millions insurance P&C Re L&H Re Solutions Re® items Q2 2012 Common shareholders' equity at 31 March 2012 18 447 10 406 8 041 2 556 7 353 1 789 30 098 Net income attributable to common shareholders 965 717 248 26 -916 8 83 Dividends -
Slide 30: Nat cat and large claims
Nat cat and large claims Nat cat premiums and claims1 Total est. Corporate USD m FY 2012 P&C Re Solutions Expected net premiums 2 740 2 500 240 Expected net claims 1 360 1 240 120 Nat cat and man-made large claims1 Total est. Q2 2012 Corporate USD m 2011 net claims net change P&C Re Solutions Earthq
Slide 31: Managing earnings volatility
Managing earnings volatility Nat cat portfolio as a key driver of insurance risk Est. Swiss Re Est. Est. Swiss Re USD bn gross claims hedge effect net1 claims Estimated annual aggregate nat cat claims (80% VaR – exceeded once in 5 years on average) 3.2 -0.8 2.4 Claims volatility from natural catas
Slide 32: Balance sheet protected against major perils
Balance sheet protected against major perils Peak exposures growing, but well managed Estimated single event losses USD bn 200 year return period Estimated Swiss Re loss: gross / net1 6 5.8 5.0 4.6 4.1 4 2.8 3.2 2.9 3.0 2 0 Earthquake Hurricane Windstorm Earthquake CALIFORNIA NORTH ATLANTIC EUROPE J
Slide 33: L&H Re Income break-down
L&H Re Income break-down Q1 Q2 Q3 Q4 Q1 Q2 USD m 2011 2011 2011 2011 2012 2012 Net income 14 525 492 585 209 248 of which approximately: Q2 2012 Net realised -156 322 447 492 118 280 Mortality experience favourable gains/losses1 VA, pre-2000 GMDB, when compared to expectations, -2 22 -25 -40 -19 -
Slide 34: Corporate Solutions Underwriting performance
Corporate Solutions Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net premiums Underwriting Q2 2011 Q2 2012 Main drivers of change earned result Property 82.4% 123.8% 2012 elevated level of large losses 181 -43 Casualty 124.7% 100.0% Absence of signific
Slide 35: Sale of Admin Re® US
Sale of Admin Re® US 31 May 2012 Q2 2012 Q3 2012 Announcement Classification as held for sale Closing Sale of Admin Re® USD 1 025m loss on sale Receives USD 0.9bn cash US announced – higher than announced due Estimated unrealised gains Estimated US GAAP to market movements of USD 596m recy
Slide 36: Group items
Group items USD m Q2 2011 Q2 2012 Revenues Premiums earned 2 1 Net investment income 42 2 Net realised investment gains/losses -25 -20 Other revenues 54 139 Total revenues 73 122 Expenses Claims and claim adjustment expenses and L&H benefits 5 5 Acquisition costs -2 Group function expenses -52 -95 I
Slide 37: Other assets/liabilities
Other assets/liabilities Other invested assets Accrued expenses and other liabilities USD m Q2 2012 USD m Q2 2012 Derivative instruments 2 121 Securities sold under agreement to 2 418 Equity accounted companies 4 861 repurchase Other investments 8 857 Derivative instruments 1 020 Securities purchase
Slide 38: Net investment income
Net investment income Corporate Admin Group Consoli- Total Total Total USD m P&C Re L&H Re Solutions Re® items dation Q2 2012 Q2 2011 H1 2012 Investment related income 382 243 26 347 5 9 1 012 1 157 1 962 Government bonds 111 152 10 132 - - 405 486 849 Corporate bonds 35 70 9 191 - - 305 267 598 Sec
Slide 39: Net realised gains/losses
Net realised gains/losses Corporate Admin Group Consoli- Total Total Total USD m P&C Re L&H Re Solutions Re® items dation Q2 2012 Q2 2011 H1 2012 Investment related 167 280 32 22 -20 5 486 153 824 Government bonds 198 260 27 30 - - 515 265 1 164 Corporate bonds 14 1 2 -1 - - 16 38 50 Securitised pro
Slide 40: Net unrealised gains/losses
Net unrealised gains/losses Corporate Admin Total Total USD m P&C Re L&H Re Solutions Re® Group items Q2 2012 Q1 2012 Government bonds 681 1 756 58 2 375 - 4 870 3 409 Corporate bonds 140 515 35 1 612 - 2 302 1 976 Securitised products -22 5 18 98 -7 92 53 Equities 92 31 7 1 - 131 236 Other 181 - 8
Slide 41: Return on investments basis
Return on investments basis Investments included in the RoI calculation USD bn Q1 2012 Q2 2012 Where to find? Total investment portfolio 179.7 176.1 Slide 43 Unit-linked investments -21.2 -20.2 Slide 43 With-profit business -3.4 -3.4 Slide 43 Total (excl. unit-linked and with-profit) 155.1 152
Slide 42: Return on investments (ROI)
Return on investments (ROI) Corporate Admin Group Consoli- Total Total Total USD m P&C Re L&H Re Solutions Re® items dation Q2 2012 Q2 2011 H1 2012 Net investment income 382 243 26 347 5 9 1 012 1 157 1 962 Net realised gains/losses (incl. fx) 167 280 32 22 -20 5 486 153 824 Other revenue 26 - - - -
Slide 43: Overall investment portfolio
Overall investment portfolio 59% invested in cash, short-term investments or government bonds Other - Other - investment insurance Cash and cash related related equivalents 12% 2% 10% USD bn End Q2 2012 Policy loans Short-term 2% investments Balance sheet values 176.1 Mortgages and other 9% Unit-lin
Slide 44: Fixed income securities
Fixed income securities USD bn End Q1 2012 End Q2 2012 Balance sheet values 100.2 98.4 Unit-linked investments -2.3 -2.4 With-profit business -1.8 -1.8 Balance sheet values (excl. unit-linked and with-profit business) 96.1 94.2 Government bonds1 Corporate bonds2 Securitised products3 63.9 61.4 24.4
Slide 45: Government bonds
Government bonds Minimal exposure to European peripherals S&P rating USD m 30 June 20121 End Q2 2012 % of Total Eurozone other: USD 1 622m United States AA+ 23 637 38.5% United Kingdom AAA 15 973 26.0% Other 9% Canada AAA 3 826 6.2% Austria EIB 33% Australia AAA 1 334 2.2% (European Investment Switz
Slide 46: Corporate bonds
Corporate bonds High quality portfolio maintained End Q2 % of End Q2 USD m 2012 Total 2012 2% 4% 17% 56% United States Resources 3 072 12.0% Pfandbriefe / 2% United Kingdom covered bonds Basic industries 1 158 4.5% 4% Australia Banks 47% Cyclical consumer goods 501 1.8% 5% Canada Specialty 15% 5% Sw
Slide 47: Securitised products
Securitised products Further reduced, especially RMBS End Q1 2012 End Q2 2012 Market value Market value BB and Est. % 2% in USD m in USD m Aaa Aa A BBB below par 22% CMBS 3 885 3 835 1 578 363 1 067 349 478 100% RMBS 1 766 1 318 357 161 227 114 459 76% 57% Other ABS 1 524 1 461 872 148 245 136 60 10
Slide 48: Equities and Alternative Investments
Equities and Alternative Investments Private equity mark-to-market gains Listed Equities Non-Cyclical Consumer Goods by sector Financials Equities 2% Information Technology 3% 2% 2% Non-Cyclical Services USD m, market values End Q1 2012 End Q2 2012 8% 28% Resources Listed Equities 1 692 1 643 9% Cyc
Slide 49: Investment mix and mid-term plan
Investment mix and mid-term plan Financial Segments and Group 100% 2% 0-5% 0-5% 1% 0-5% 1% 0-5% 3% 0-5% 6% 7% 0-5% 0-5% 6% 5-10% 90% 14% 5-15% 5-15% 18% 10-30% 16% 20-30% 80% 10% 10-20% 21% 15-30% 44% 6% 3% 70% 5% 40-50% 5-10% 0-10% 5-15% 5% 60% 5-10% 42% 5% 50% 39% 5-15% 35-55% 40-60% 54% 45% 40% 4
Slide 50: Shareholders' equity H1 2012
Shareholders' equity H1 2012 Gov bonds -0.3 Corp bonds 0.5 USD m Sec products 0.2 Equities and 32 000 others 0.1 Tax -0.1 31 000 Total 0.4 1 102 31 016 1 224 -1 134 30 000 -186 400 20 29 914 29 000 29 590 28 000 27 000 26 000 25 000 Shareholders' Net income Dividends Other Foreign Net change in Comm
Slide 51: Swiss Re's capital structure
Swiss Re’s capital structure Senior long-term financial debt Hybrid capital USD bn Mandatory convertibles CPCI (2009) and contingent capital instruments (part of shareholders' equity) Common shareholders' equity 45 75% Senior financial debt to total capital Hybrid to total capital 0.7 5.0 4.2 3.0 0.
Slide 52: Number of shares
Number of shares in millions Q2 2012 Total shares 370.7 of which Treasury shares and shares reserved for 27.0 corporate purposes Shares outstanding1 (as at 30 June 2012) 343.7 Shares outstanding1 (weighted average) 344.1 1 Shares outstanding is the number of shares eligible for dividends and is used
Slide 53: Exchange rates
Exchange rates Average rates EUR/USD GBP/USD CAD/USD CHF/USD Gross premiums written Q2 2012 split by main Q2 2011 1.40 1.62 1.02 1.10 currencies Q1 2012 1.31 1.57 1.00 1.08 Other 13% Q2 2012 1.30 1.58 1.00 1.08 JPY Change Q2 2011/Q2 2012 -7.14% -2.47% -1.96% -1.82% 4% CAD USD Change Q1 2012/Q2 2012
Slide 54: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 10 September 2012 Investors and Media meeting Monte Carlo 08 November 2012 Third Quarter 2012 results Conference call 21 February 2013 Annual Results Zurich 10 April 2013 149th Annual General Meeting Zurich Investor Relations contacts Hotline E-mail +
Slide 55: Cautionary note on forward-looking statements
Cautionary note on forward-looking statements Certain statements and illustrations contained herein are forward-looking. These statements and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historic