Swiss Re Ag · SIX:SREN
Swiss Re — Q1 2014 Earnings Presentation
42 slides from Swiss Re's earnings presentation, May 7, 2014
Slide 1: First quarter 2014 results
First quarter 2014 results Analyst and investor presentation Zurich, 7 May 2014
Slide 2: Today's agenda
Today’s agenda • Introduction Michel M. Liès, Group CEO • Business performance David Cole, Group CFO • April renewals and financial targets Michel M. Liès, Group CEO First quarter 2014 results 2
Slide 3: Business performance
Business performance David Cole, Group CFO First quarter 2014 results 3
Slide 4: Q1 2014 Financial highlights
Q1 2014 Financial highlights Strong Group performance • Group net income USD 1.2bn – Return on equity 14.9%, earnings per share USD 3.58 (CHF 3.20) – Strong investment performance, return on investments 3.7% • Reinsurance net income USD 1.1bn – Strong underwriting performance in P&C continues – Good
Slide 5: Key figures Q1 2014
Key figures Q1 2014 Corporate Admin Group Total Total USD m, unless otherwise stated P&C Re L&H Re Solutions Re® items Q1 2014 Q1 2013 • Premiums earned and fee income 3 813 2 672 830 236 - 7 551 6 782 • Net income/loss 1 003 51 80 48 44 1 226 1 380 • Return on investments1 3.6% 2.8% 3.7% 4.9% 3.3%
Slide 6: P&C Reinsurance
P&C Reinsurance Robust underwriting and increased investment result Net premiums earned Combined ratio Net income USD m % USD m +7.9% +9.1%pts -0.6% 69.7% 1 009 1 003 ROE: 3 813 3 534 29.8% 78.8% Q1 2013 Q1 2014 Q1 2013 Q1 2014 Q1 2013 Q1 2014 • Increase in premiums earned • Net impact from large na
Slide 7: L&H Reinsurance
L&H Reinsurance Strong new business growth, good operating margin Operating revenues Operating margin1 Net income USD m % USD m +16.8% -4.0%pts -77.0% 3 086 13.6% 2 643 222 9.6% ROE: 3.6% Q1 2013 Q1 2014 Q1 2013 Q1 2014 Q1 2013 51 Q1 2014 • Premiums earned and fee • Operating margin of 9.6% • Net re
Slide 8: Corporate Solutions
Corporate Solutions Profitable organic growth continues Net premiums earned Combined ratio Net income USD m % USD m +35.4% +7.6%pts -20.8% 830 87.6% 613 101 95.2% 80 ROE: 12.0% Q1 2013 Q1 2014 Q1 2013 Q1 2014 Q1 2013 Q1 2014 • Increase in net premiums earned • No impact from nat cat events, • Realis
Slide 9: Admin Re®
Admin Re® Cash generation helped by positive prior year effect Gross cash generation1 Return on investments Net income USD m % USD m +220.6% +0.2%pts -38.5% 202 4.7% 4.9% 78 ROE: 48 3.2% Q1 2013 63 Q1 2014 Q1 2013 Q1 2014 Q1 2013 Q1 2014 • Solid underlying gross cash • Return on investments of 4.9%
Slide 10: Group investment result
Group investment result Consistent and strong performance Average invested assets1 Return on investments2 Total return2 USD bn, basis for ROI calculation % % -2.8% +0.3%pts +7.2%pts 118.2 114.9 3.7% 7.8% 3.4% Q1 2013 Q1 2014 Q1 2013 Q1 2014 Q1 2013 0.6% Q1 2014 • Decrease in average invested • ROI o
Slide 11: Investment mix
Investment mix Group asset allocation in line with mid-term plan 100% 1% 0-5% 9% 5-10% • Net reduction in equity and 90% alternatives exposure 80% 28% 20-30% – USD 2.5bn of listed equity sales in 70% Q1 2014 (includes USD 0.6bn of 60% 5-10% 5% credit ETFs) 50% – Sales realised embedded gains 40% 33%
Slide 12: Common shareholders' equity Q1 2014
Common shareholders' equity Q1 2014 Increase driven by net income and increase in unrealised gains Contains dividends subsequently paid USD m out in April 2014: USD 3.1bn 34 000 831 33 919 15 33 000 -3 1 226 Gov bonds 0.9 32 000 Corp bonds 0.5 31 850 Sec products 0.0 Equities and 31 000 others -0.3
Slide 13: Swiss Re's capital structure
Swiss Re's capital structure Leverage ratios within target range USD bn Core capital 1 Total hybrid incl. contingent capital Senior debt 2 LOC 3 Senior leverage plus LOC ratio 4 Subordinated leverage ratio5 100% 90% 13.6 13.8 80% 8.5 6.7 11.3 70% 7.0 12.7 16.3 9.5 16.4 60% 6.5 48% 10.7 5.4 56% 50% 5
Slide 14: April renewals and financial targets
April renewals and financial targets Michel M. Liès, Group CEO First quarter 2014 results 14
Slide 15: P&C Reinsurance: 2014 renewals
P&C Reinsurance: 2014 renewals Overall price quality remains at an attractive level January 2014 treaty renewals1 -2% YTD 2014 renewals (January – April) USD 9.8bn USD 9.6bn Treaty portfolio volume Up for renewal Estimated USD 11.2bn USD 11.2bn 1 Jan 2014 outcome April 2014 treaty renewals +14% USD
Slide 16: P&C Reinsurance: 2014 renewals
P&C Reinsurance: 2014 renewals Portfolio weighting by line of business and region Gross premium volume, treaty portfolio Up for renewal YTD April Estimated outcome YTD April By line of business 13% 13% Casualty 34% 43% Nat Cat 25% 19% Property 1 Specialty 1 28% 25% By region 29% 45% 32% 46% EMEA Ame
Slide 17: Group financial targets
Group financial targets On track ROE 700 bps above risk free EPS growth 10% average ENW per share growth plus average over 5 years (2011- annual growth rate, adjusted dividends 10% avg. annual 2015) for special dividends1 growth rate over 5 years in % in USD2 in USD2 144.5 14.9 13.0 11.9 123.1 13.4
Slide 18: Appendix
Appendix First quarter 2014 results 18
Slide 19: Appendix
Appendix • Business segment results Q1 2014 – Income • Return on investments (ROI) statement • Overall investment portfolio • Business segment results Q1 2014 – Balance sheet • Government bonds • Shareholders' equity and ROE Q1 2014 • Corporate bonds • Large losses – P&C Reinsurance • Securitised pr
Slide 20: Business segment results Q1 2014 – Income statement
Business segment results Q1 2014 Income statement Re- Corporate Admin Group Consoli- Total Total USD m insurance P&C Re L&H Re Solutions Re® items dation Q1 2014 Q1 2013 Revenues Premiums earned 6 472 3 813 2 659 830 126 - - 7 428 6 617 Fee income from policyholders 13 - 13 - 110 - - 123 165 Net inv
Slide 21: Business segment results Q1 2014 – Balance sheet
Business segment results Q1 2014 Balance sheet Re- Corporate Admin Group Consoli- End End 31 March 2014, USD m insurance P&C Re L&H Re Solutions Re® items dation Q1 2014 FY 2013 Assets Fixed income securities 56 908 26 665 30 243 4 753 20 247 66 - 81 974 79 296 Equity securities 3 042 2 661 381 793
Slide 22: Shareholders' equity and ROE Q1 2014
Shareholders' equity and ROE Q1 2014 Re- Corporate Admin Group Total1 USD m insurance P&C Re L&H Re Solutions Re® items Q1 2014 Common shareholders' equity2 at 31 December 2013 18 384 12 904 5 480 2 771 5 804 4 932 31 850 Net income attributable to common shareholders 1 054 1 003 51 80 48 44 1 226 D
Slide 23: Large losses – P&C Reinsurance
Large losses P&C Reinsurance Expected nat cat premiums and losses1, 2 USD m Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 FY 2013 Expected net nat cat premiums3 25% 15% 35% 25% 2 900 3 100 Expected net nat cat losses 25% 15% 35% 25% 1 500 1 460 Actual large losses1 USD m Q1 2014 3M 2014 3M 2013 Net nat ca
Slide 24: Large losses – Corporate Solutions
Large losses Corporate Solutions Expected nat cat premiums and losses1, 2 USD m Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 FY 2013 Expected net nat cat premiums3 25% 25% 25% 25% 375 340 Expected net nat cat losses 15% 15% 45% 25% 200 170 Actual large losses1 USD m Q1 2014 3M 2014 3M 2013 Net nat cat lo
Slide 25: P&C Reinsurance – Underwriting performance
P&C Reinsurance Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net Q1 Q1 premiums Underwriting 2013 2014 Main drivers of change earned result Property 56.3% 56.1% • Benign nat cat season and low claims 1 738 763 emergence for both periods Casualty 90.0% 112.
Slide 26: Corporate Solutions – Underwriting performance
Corporate Solutions Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net Q1 Q1 premiums Underwriting 2013 2014 Main drivers of change earned result Property 77.7% 101.5% • Driven by various man-made losses and 326 -5 unfavourable prior year development Casualt
Slide 27: Net investment income
Net investment income Corporate Admin Group Consoli- Total Total USD m P&C Re L&H Re Solutions Re® items dation Q1 2014 Q1 2013 Investment related income 213 331 26 229 40 -4 835 757 Government bonds 87 132 9 58 - - 286 343 Corporate bonds 46 116 13 149 - - 324 257 Securitised products 26 36 3 10 1
Slide 28: Net realised gains/losses
Net realised gains/losses Corporate Admin Group Consoli- Total Total USD m P&C Re L&H Re Solutions Re® items dation Q1 2014 Q1 2013 Investment related 217 -82 43 54 2 - 234 255 Government bonds 45 -5 - 49 - - 89 181 Corporate bonds 11 1 2 3 - - 17 65 Securitised products 2 4 - 2 1 - 9 2 Equities 194
Slide 29: Net unrealised gains/losses
Net unrealised gains/losses Corporate Admin Group End End USD m P&C Re L&H Re Solutions Re® items Q1 2014 FY 2013 Government bonds 163 502 -16 485 - 1 134 261 Corporate bonds 91 381 15 977 - 1 464 945 Securitised products 41 116 8 61 2 228 206 Equities 431 48 148 - 53 680 966 Other 277 17 1 9 19 323
Slide 30: Return on investments basis
Return on investments basis Investments included in the ROI calculation End End USD bn Q1 2014 FY 2013 Total investment portfolio 163.3 158.2 Unit-linked investments -24.3 -24.6 With-profit business -3.5 -3.5 Total (excl. unit-linked and with-profit) 135.5 130.1 Cash and cash equivalents -9.5 -7.2 P
Slide 31: Return on investments (ROI)
Return on investments (ROI) Corporate Admin Group Consoli- Total Total USD m P&C Re L&H Re Solutions Re® items dation Q1 2014 Q1 2013 Net investment income 213 331 26 229 40 -4 835 757 Net realised gains/losses1 217 -82 43 54 2 - 234 255 Other revenues 10 - - - 1 -10 1 - Investment operating income
Slide 32: Overall investment portfolio
Overall investment portfolio 54% invested in cash, short-term investments or government bonds Cash and Mortgages cash and other Other equivalents End loans 9% 7% 2% Short-term USD bn Q1 2014 investments Equities Balance sheet values 163.3 15% 6% Securitised Unit-linked investments -24.3 products 5%
Slide 33: Government bonds
Government bonds Steady allocation S&P rating End USD m 31 Mar 20141 Q1 2014 % of Total United States AA+ 12 436 28.7% United Kingdom AAA 11 308 26.1% Eurozone other: USD 1 222m Canada AAA 3 310 7.6% China AA- 1 032 2.4% Other 6% Australia AAA 736 1.7% Finland Japan AA- 733 1.7% 24% Austria 36% Swit
Slide 34: Corporate bonds
Corporate bonds High quality and well diversified End % of End USD m Q1 2014 Total Q1 2014 United States 6% Pfandbriefe / 2% 56% Resources 3 633 11.3% 13% United Kingdom covered bonds 3% Basic industries 1 648 5.1% Netherlands Banks 52% 3% Australia Cyclical consumer goods 938 2.9% Specialty 15% 5%
Slide 35: Securitised products
Securitised products 56% AAA rated, 89% investment grade 3% End End BB and Est. % USD m FY 2013 Q1 2014 Aaa Aa A BBB below par 43% CMBS 2 908 2 705 1 489 216 423 194 383 103% 39% RMBS 915 924 234 27 365 106 192 89% Other ABS 2 453 2 483 1 736 318 203 159 67 102% 15% Other Securitised 199 174 62 56 2
Slide 36: Equities and alternative investments
Equities and alternative investments Net reduction in listed equities Equities Listed Equities Exchange-traded funds End End by sector Non-Cyclical Consumer Goods 2% 4% 1% USD m FY 2013 Q1 2014 5% 12% Financials Information Technology Listed Equities1 6 248 3 757 8% Cyclical Services Private Equity1
Slide 37: Group capitalisation
Group capitalisation Swiss Solvency Test1 (SST) USD bn; % SST risk-bearing SST target capital SST ratio capital 70 300% 269% 245% 241% 60 250% 208% 213% 50 200% 40 150% 30 100% 20 10 50% 40.5 15.0 38.5 18.5 40.7 19.1 48.7 19.8 52.2 21.6 0 0% SST 1/2010 1/2011 1/2012 1/2013 1/2014 Group solvency rema
Slide 38: Number of shares
Number of shares in millions Q1 2014 Total shares 370.7 of which Treasury shares and shares reserved for 28.5 corporate purposes Shares outstanding1 (as at 31 March 2014) 342.2 Shares outstanding1 (weighted average) 342.8 1 Shares outstanding is the number of shares eligible for dividends and is use
Slide 39: Exchange rates
Exchange rates Average rates CHF/USD EUR/USD GBP/USD Gross Premiums written Q1 2014 split by main currencies Q1 2013 1.08 1.33 1.56 Q4 2013 1.08 1.33 1.56 Q1 2014 1.12 1.37 1.65 Change Q1 2013/Q1 2014 3.70% 3.01% 5.77% Other CAD 4% 13% Change Q4 2013/Q1 2014 3.70% 3.01% 5.77% USD AUD 36% 5% GBP 7% C
Slide 40: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 3 July 2014 Investors' Day London 6 August 2014 Second Quarter 2014 results Conference call 7 November 2014 Third Quarter 2014 results Conference call 19 February 2015 Annual Results Conference call Investor Relations contacts Hotline E-mail +41 43 28
Slide 41: First quarter 2014 results
First quarter 2014 results 41
Slide 42: 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