Swiss Re Ag · SIX:SREN
Swiss Re — H1 2003 Earnings Presentation
32 slides from Swiss Re's earnings presentation, Aug 29, 2003
Slide 1: Analysts' meeting August 2003
ab Analysts’ meeting 29 August 2003 Zurich, Switzerland ab Agenda Executive summary Coomber Results and investments 1H 2003 Godbehere Loss development table 2002 Business overview Coomber Property & Casualty Life & Health Financial Services Looking forward Coomber Q&A Analysts' meeting 29.08.2
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
ab Executive summary (I) Strong increase in net income to CHF 691 million from CHF 118 million Shareholders’ equity grew CHF 1.2 billion to CHF 17.9 billion Property & Casualty premium growth of 33% in original currencies and combined ratio 99.8% achieved Life & Health return on operating re
Slide 4: Target matrix
ab Target matrix Business Average target Group Key figures 1H2003 2003 - 2005 Property & Combined ratio 99.8% 98%* Casualty Premium growth 18% 8% Life & Return on operating revenue 8.1% 9% Health Operating revenue growth -14% 7% Financial Premium business: Services Combined ratio 96.0% 95% Premium g
Slide 5: Group results 1H 2003 key points and income statement
ab Group results 1H 2003 key points Results materially affected by FX movements, in particular 18% decrease in US dollar relative to Swiss franc Overall premium growth 19% at constant FX rates – Non-life 32% – Life 3% – Health due to large run-off component -14% Strong improvements in all area
Slide 6: Expense ratios and equity reconciliation
ab Expense ratios Operational efficiencies achieved in all business groups in % 2000 2001 2002 1H 2002 1H 2003 Property & Casualty 6.5 5.1 4.9 5.2 4.8 Life & Health 4.7 4.6 5.0 5.3 4.4 Financial Services Premium business n.a. n.a. n.a. 8.8 6.8 Fee business n.a. n.a. n.a. 109.0 88.2 Analysts' meeting
Slide 7: Investment headlines and key points
ab Investment headlines Annualised return on investments of 4.8% after impairments (1H 2002: 4.8%); marked-to-market 7.7% (1H 2002: 1.4%) Lower interest rates and FX negatively impacted current investment income: – excluding FX movements, decrease of 2% – net of expenses, income was flat Net r
Slide 8: Investment result and asset allocation
ab Investment result Marked-to-market returns significantly improved (vs Swiss GAAP) by unrealised gains on bonds, and to a lesser extent, equities Swiss GAAP Swiss GAAP M-t-m M-t-m CHF millions 1H 2002 1H 2003 1H 2002 1H 2003 Current investment income 2 994 2 558 2 994 2 571 Realised gains/losses 5
Slide 9: Management of interest rate exposure
ab Management of interest rate exposure A large portion of fixed-income portfolio supports life liabilities, which are largely duration matched, i.e. the interest rate risk is neutralised The remainder of the fixed-income portfolio is positioned to produce significant cash flows from maturities
Slide 10: Loss development table
ab Loss development table (LDT) First time disclosure by Swiss Re Table shows the development of non-life claims reserves for the last 10 years All Swiss Re’s non-life claims reserves are included and are based on published accounts Figures are calculated on accident year development Claim
Slide 11: Loss development table: main points
Loss development table: ab main points Early years were impacted by Swiss Re’s strengthening of reserves in 1994/95 for US asbestos and pollution exposures More recent years show favourable development in prior year loss reserves on constant FX rates Table demonstrates that Swiss Re’s approach
Slide 12: Property & Casualty Business Group headlines
ab Property & Casualty Business Group Analysts' meeting 29.08.2003 Slide 23 Property & Casualty Business Group ab headlines 18% premium growth, 33% in original currencies, well in excess of target Operating income up to CHF 822m (1H 2002: CHF 104m) Combined ratio improved to 99.8%; 2003 target
Slide 13: Property & Casualty results
Property & Casualty Business Group ab results CHF millions 1H 2002 1H 2003 Change Revenues Premiums earned 6 654 7 864 18% Net investment income 792 672 -15% Net realised investment gains/losses -318 133 Total revenues 7 128 8 669 22% Expenses Claims and claim adjustment expenses -5 186 -5 837 13% A
Slide 14: P&C combined ratio by line and 2003 renewals
P&C: Improvements in combined ab ratio by line of business 1H 2002 1H 2003 Main drivers of improvement Property 100.5% 90.3% Significant increase in rates Liability 109.4% 105.8% Higher rates and better terms and conditions begin to emerge Motor 108.4% 105.6% Adverse development on a few accounts wo
Slide 15: Property & Casualty outlook
Property & Casualty Business Group ab outlook Premium growth in original currencies for the full year expected to be below first half growth but above 12% Improving underwriting performance will continue in 2H 2003 Swiss Re’s risk management and underwriting leadership together with today’s pr
Slide 16: Life & Health Business Group headlines and results
Life & Health Business Group ab headlines Operating revenue growth in original currencies flat due to lower primary protection market growth and Swiss Re’s pricing increases Return on operating revenues 8.1% – Life: 10.0% (1H 2002: 6.9%) – Health: 0.6% (1H 2002: 29.1%) Management expense ratio
Slide 17: L&H premium growth and operating performance
ab L&H: Analysis of premium growth CHF millions Premiums 1H 2002 5 816 Foreign exchange -826 Reduction health -158 Organic growth life 131 Premiums 1H 2003 4 963 Analysts' meeting 29.08.2003 Slide 33 0 1 000 2 000 3 000 4 000 5 000 6 000 ab L&H: Operating performance 1H 2002 2H 2002 1H 2003 Target O
Slide 18: L&H focusing on higher returns and outlook
ab L&H: Focusing on higher returns Percentage of total premiums Return on operating revenues 73% 11.6% 2000 2000 27% 2.5% 78% 11.1% 2001 2001 22% 3.5% 80% 7.9% 2002 2002 20% 13.8% 81% 10.0% 1H 2003 1H 2003 19% 0.6% Analysts' meeting 29.08.2003 Slide 35 Life Health Life & Health Business Group ab out
Slide 19: Financial Services Business Group headlines
ab Financial Services Business Group Analysts' meeting 29.08.2003 Slide 37 Financial Services Business Group ab headlines Revenue growth significantly above target in all core business lines - total revenues grew by 12%, 28% in original currencies All businesses achieving significant improvement
Slide 20: Financial Services results
Financial Services Business Group ab results CHF millions 1H 2002 1H 2003 Change Revenues Premiums earned 1 366 1 555 14% Net investment income 242 187 -23% Net realised investment gains/losses -58 -41 29% Trading revenues, fees & commissions 340 423 24% Total revenues 1 890 2 124 12% Expenses Claim
Slide 21: FS change in operating income and outlook
ab FS: Change in operating income Significant profitability improvements due to increased revenues, favourable pricing, improved underwriting and lower claims activity CHF millions 17 273 300 65 403 200 100 -379 0 -100 235 -200 -300 -68 -400 -500 1H 2002 Change in Risk Solutions Credit Cap. Markets
Slide 22: Looking forward: Outlook
ab Looking forward John Coomber Chief Executive Officer Analysts' meeting 29.08.2003 Slide 43 ab Outlook Business fundamentals are very good with attractive returns expected for all three business groups Investment portfolio positioned to manage uncertainties; strong cash flow will benefit from
Slide 23: Questions and answers
ab Questions and answers Analysts' meeting 29.08.2003 Slide 45 ab Appendix Analysts' meeting 29.08.2003 Slide 46
Slide 24: Income statement at 1H 2003 FX rates
Income statement : ab 1H 2002 at 1H 2003 FX rates CHF millions Revenues 1H 2002 1H 2003 Change Premiums earned 12 101 14 382 19% Net investment income 2 441 2 442 0% Net realised investment losses -177 -26 -85% Trading revenues 61 221 262% Other revenues 174 116 -33% Total revenues 14 600 17 135 17%
Slide 25: Loss development table: net claim reserves and payments
Loss development table: ab net claim reserves and payments CHF millions Original reporting year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Claim reserves as of 31.12. 17 478 18 308 21 060 21 282 28 474 31 767 33 387 38 594 42 792 52 169 45 688 1 year later 4 804 4 441 4 431 5 170 5 572 5
Slide 26: Current investment income and unrealised gains
Current investment income ab 1H 2003 vs 1H 2002 Current investment income is 2% lower than in 1H 2002 in local currency terms. On the bond portfolio, lower yields are largely compensated by higher volumes, notably in the US 1H 2002 1H 2002 1H 2003 Change Change at 1H 2003 as reported at constant CHF
Slide 27: Net realised investment gains and equity exposure
Net realised investment gains ab 1H2003 vs 1H2002 Net investment gains improved by CHF 252m, driven by realised gains on bonds as well as a lower impairment charge, partly off-set by unrealised losses on the equity hedge as of the end of June Total Total CHF millions 1H 2002 1H 2003 Variance Net rea
Slide 28: Return on investments calculation
ab Return on investments calculation 1) CHF millions 1H 2002 1H 2003 Investment result (as defined in income statement) 2 526 2 416 Adjustments2) -18 18 Investment result (investment return target base) 2 508 2 434 Investments (as defined in the balance sheet) 89 928 91 055 Adjustments3) -772 -1 770
Slide 29: P&C business mix and premium growth
P&C: Shift to non-proportional and ab facultative business 100% 16% 18% 20% 80% 27% 36% 36% 60% 40% 57% 20% 46% 44% 0% 2001 2002 2003 Prop NP Fac Based on treaty year premiums (2003 estimated) Analysts' meeting 29.08.2003 All years based on average 2003 foreign exchange rates Slide 57 Traditio
Slide 30: Portfolio credit default swap exposure
Quality of Swiss Re’s exposure ab in Portfolio Credit Default Swaps Dec 2001 Dec 2002 Jun 2003 Total Notional Exposure to Swiss Re [CHF] 36.8 bn 25.3 bn 21.9 bn Super-Senior Super-Senior Super-Senior (Super AAA) (Super AAA) (Super AAA) 90.1% 86.4% 89.1% Senior Senior Senior (AAA - BBB-) (AAA - BBB-)
Slide 31: Cat bond market and Atradius / Gerling NCM
ab Cat bond market and Swiss Re Swiss Re is the largest participant for own account and clients USD 1139 m USD 967 m USD 989 m Prime USD 910 m Redwood Studio Re USD 825 m Arbor USD 744 m USD 725 m Golden Med Re Eagle Atlas Re II Parametric Trinity Re II NeHi SR Mosaic Re Pioneer Namazu USAA USAA 200
Slide 32: PartnerRe: exit completed at attractive terms
PartnerRe: ab Exit completed at attractive terms Sale of PartnerRe stake in line with Swiss Re’s strategy – to actively allocate capital to its growth opportunities in core business, and – to reduce equity exposure Investment exit commenced in late 2002 and completed in May 2003 with divestment