Swiss Re Ag · SIX:SREN
Swiss Re — Bellevue Meets Management Seminar 2015
37 slides from Swiss Re's conference presentation, Jan 15, 2015
Slide 1: Prosperity in an anemic growth and zero interest environment
Bellevue Meets Management Seminar: "Prosperity in an anemic growth and zero interest environment" Michel M. Liès, Group CEO Zurich, 15 January 2015
Slide 2: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 2
Slide 3: Global macro outlook – moderate growth, mild inflation and low interest rates
Global macro outlook – moderate growth, mild inflation and low (but rising) interest rates • US expansion is robust and supported by consumer spending, business investment and housing construction Global growth • Europe is barely growing because of tight fiscal and credit conditions • Growth in oil-
Slide 4: Long-term inflation expectations have been declining lately, particularly in Germany
Long-term inflation expectations have been declining lately, particularly in Germany Break-even Inflation, 10yr Bonds, weekly data % 4.5 Break-even inflation is 4.0 calculated as the difference 3.5 between the nominal bond 3.0 yield and the yield of an 2.5 inflation- protected bond. 2.0 Note: UK inf
Slide 5: Diverging global monetary policies increasing market uncertainties
Diverging global monetary policies increasing market uncertainties • Tightening by the US Fed and BoE is expected mid-to-late this Major central year banks interest • ECB is expected to be on hold throughout 2015 and 2016 and rates government bond purchases (QE) are increasingly likely • US fed fund
Slide 6: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 6
Slide 7: Interest rates expected to stay low, increasing pressure on insurers' running yield
Interest rates are expected to stay low, which will increase pressure on insurers' running yield Germany United States 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% Running yield of P&C insurers Running yield of P&C insurers 10y government bond yield, average of year 10y government bond yield, ave
Slide 8: Reinsurance industry capitalisation has been building-up in recent years
Reinsurance industry capitalisation has been building-up in recent years 2009=100 Capital excl unr. gains Unrealised gains Net premiums earned 130 100 70 4Q09 4Q10 4Q11 4Q12 4Q13 1Q14 2Q14 Capitalisation driven by underwriting result, less so by unrealised gains Source: Swiss Re Economic Research an
Slide 9: Growth acceleration of commercial insurance thanks to urbanisation-led infrastructure spending
Growth acceleration of commercial insurance thanks to urbanisation-led infrastructure spending Urbanisation rate, % Between1950 and 2010, the world’s urban population grew nearly fivefold, with on average 47 million more urban residents every year In 2011, 73.5% of the world’s 3.6 billion urban
Slide 10: The rise of Asia's middle-income class will fuel motor and home insurance growth
The rise of Asia's middle-income class will be the fuel for growth of motor and home insurance in Asia Share of total number of global middle- Share of global middle-income class 100% income class consumption 100% 90% 90% Asia 80% 80% Pacific 70% 70% Asia Pacific Asia 60% 60% Pacific 50% 50% 40% 40%
Slide 11: Emerging market insurance premium growth expected to accelerate
Emerging market insurance premium growth expected to accelerate 15% Non-life premium growth, by 10% region 5% Emerging Asia is the strongest market 0% Growth likely to improve in -5% 2015 in all EMs -10% EM premium growth remains EM Asia ME and N LatAm CEE SSA Advanced robust in 2016 Africa 20
Slide 12: Complex and challenging regulatory environment, with solvency reforms
Complex and challenging regulatory environment, with solvency reforms fuelling financial repression United States Europe • NAIC solvency changes, but • Solvency II on track rather qualitative (ORSA) • New supervisory architecture • Establishment of Federal • Banking Union Insurance Office (FIO) • Cr
Slide 13: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 13
Slide 14: Key drivers of P&C reinsurance pricing are mostly adding downward pressure
Key drivers of P&C reinsurance pricing are mostly adding downward pressure Pricing drivers Impact Comments Low interest rates Improve P&C underwriting discipline Greater recognition of risk mitigating tools under risk- Regulatory changes based and economic solvency frameworks Natural catastrophes No
Slide 15: Strong reported industry underwriting results, based on low natural catastrophes
Strong reported industry underwriting (U/W) results, based on low natural catastrophes Good industry U/W results over the last 11 quarters Quarterly combined ratio Industry underwriting results remain strong during the first 150% 154.3% three quarters of 2014, amidst 140% an absence of large natur
Slide 16: Alternative capital continues to pressure
Alternative capital continues to pressure • Strong US focus; approximately 23% Estimated size of global AC market that is market share of the US catastrophe focusing on Nat Cat vs cat bond spread market USD bn bps • Due to increased competition cat bond 60 1400 spreads have halved over the past two
Slide 17: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 17
Slide 18: Massive gap between total and insured losses illustrates market potential
Massive gap between total and insured losses illustrates the potential of the insurance market Natural catastrophe losses 1980-2013, in USD billion (2013 prices) 450 400 350 Uninsured losses 300 250 Ocean Drive, FL, 1926 200 150 100 50 0 1980 1985 1990 1995 2000 2005 2010 Ocean Drive, FL, 2000 Note:
Slide 19: Protection gap is also prominent in life insurance
Protection gap is also prominent in life insurance Mortality protection gap Protection needed Protection Income to maintain living in place standard Net financial assets / savings Relevant life insurance Asia – Pacific: Mortality protection gap per working person with dependents: USDk 200 100 0 Sour
Slide 20: Different solutions are available to address the insurance gap
Different solutions are available to address the insurance gap How to close the gap? Economic Solution type Description loss Foregone revenues Damaged public Risk transfer solutions physical assets for (sub)sovereigns to cover Macro their direct or indirect costs gap Clean up costs Emergency relief
Slide 21: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 21
Slide 22: Swiss Re at a glance
Swiss Re at a glance Swiss Re is a leading and highly diversified global reinsurer, founded in Zurich (Switzerland) in 1863 The company offers traditional reinsurance products and related services for property and casualty, as well as for life and health businesses These traditional products are com
Slide 23: Leadership through geographic and product diversification
Leadership through geographic and product diversification Net premiums earned1 2013 (USD 28.8 bn) by region (in USD bn) … and by business segment: 11.5 11.3 6.0 Admin Re® Corporate 5% Solutions 10% P&C Re 50% Americas Europe Asia L&H Re (incl. Middle East /Africa) 35% 40% 39% 21% Swiss Re benefits f
Slide 24: Swiss Re's strong P&C underwriting and stable track record
Swiss Re's strong P&C underwriting and stable track record 130% 5% 120% 4% 110% 114.1 101.1 96.8 98.3 98.2 97.3 95.4 100% 104.0 93.9 104.7 3% 93.1 98.4 98.4 97.9 90% 93.7 97.4 92.8 2% 90.4 90.2 80% 85.3 84.5 83.1 1% 70% 60% 0% 5-year US Treasury risk-free rates (RHS) Group combined ratio (LHS) Group
Slide 25: Swiss Re has a different business model from alternative capital providers
Swiss Re has a different business model from alternative capital providers Collateralised Hedge fund Swiss Re reinsurers reinsurers 1. Main income driver Underwriting Investing Underwriting 2. Risk pool US Nat Cat concentrated Low severity only Diversified 3. Service level & client relationships 4.
Slide 26: We have a "high touch" interaction model
We have a "high touch" interaction model Visualisation of a client relationship Over the last four years… with a large Global client • …we have documented 1 986 Swiss Re meetings and 1 060 phone calls between Swiss Re employees (87 ) and those of a Global Client (99 ) • …we have documented more than
Slide 27: Key competencies driving Swiss Re's competitive advantage in underwriting
Key competencies driving Swiss Re's competitive advantage in underwriting Portfolio Hedging R&D Innovation, 151 Years steering large and structured Capital transactions strength In an inefficient Our retro and Re/insurance is a Focus on tailored Superior balance market, skilled hedging team knowledg
Slide 28: Swiss Re applies an active cycle management in portfolio steering
Swiss Re applies an active cycle management in portfolio steering Casualty portfolio development and rates Steering and growth approach US GAAP Gross Earned Premium (USD bn) 7 140 • We manage the business 6 130 according to the pricing cycle 5 120 • We will continue to pursue a profitability-focused
Slide 29: Swiss Re is successfully growing in High Growth Markets
Swiss Re is successfully growing in High Growth Markets 6 HGM P&C Re total • We are growing both top and bottom US GAAP Gross Earned Premiums (USD bn) HGM P&C Re ex China line in HGM P&C Reinsurance 5 2013 • China dominates top line due to large motor quota shares, but we are also growing strongly i
Slide 30: Strong flow of internal and external dividends since 2012 alignment
Swiss Re has demonstrated strong flow of internal and external dividends since the alignment of the corporate structure concluded in 2012 USD 7.0bn distribution to shareholders Swiss Re Ltd USD 5.3bn USD 2.7bn USD 0.8bn USD 1.8bn Corporate Reinsurance Admin Re® Solutions P&C L&H As of 30 June 2014 •
Slide 31: Swiss Re is on track to meet its group financial targets
Swiss Re is on track to meet its group financial targets ROE 700 bps above risk free EPS growth 10% average ENW per share growth plus average over 5 years annual growth rate, adjusted dividends 10% avg. annual (2011-2015) for special dividends1 growth rate over 5 years in % in USD2 in USD2 144.5 13.
Slide 32: Swiss Re is well positioned
Swiss Re is well positioned Low interest rates Strong and stable track record in P&C underwriting In L&H, focus on reinsurance, avoiding primary business with guarantees Prudent, ALM-matched asset portfolio Regulatory changes Swiss Solvency Test (SST) has given Swiss Re seven years of practi
Slide 33: Today's agenda
Today's agenda Global economic outlook and interest rates Implications for insurance markets Developments in P&C insurance pricing Insurance protection gap and growth opportunities Swiss Re is well positioned Conclusion Q&A Bellevue meets management seminar | Zurich, 15 January 2015 33
Slide 34: Conclusion
Conclusion • Globally, growth is accelerating modestly, which will be pushing up long- term interest rates but improved investment returns for insurers will arrive with a lag • Massive insurance and protection gaps underpin the potential of the insurance market • Swiss Re benefits from geographic an
Slide 35: Bellevue meets management seminar | Zurich, 15 January 2015
Bellevue meets management seminar | Zurich, 15 January 2015 35
Slide 36: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 2015 19 February Annual Results 2014 Conference call 18 March Publication of Annual Report 2014 and EVM 2014 21 April 151st Annual General Meeting Zurich 30 April First Quarter 2015 Results Conference call 30 July Second Quarter 2015 Results Conferenc
Slide 37: 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