Swiss Re Ag · SIX:SREN
Swiss Re — FY2012 Earnings Presentation
60 slides from Swiss Re's earnings presentation, February 2013
Slide 1: Swiss Re
Swiss Re
Slide 2: Today's agenda
Today’s agenda Financial performance George Quinn, Group CFO Business update Michel M. Liès, Group CEO Annual results 2012 2
Slide 3: Financial performance
Financial performance George Quinn, Group CFO Annual results 2012 3
Slide 4: 2012 Financial highlights
2012 Financial highlights Excellent Group performance, delivered via all business units and the investment result Group net income USD 4.2bn – Return on equity 13.4%, earnings per share USD 11.85 (CHF 11.13) – Group combined ratio 83.1% – Return on investments 4.0% Reinsurance result driven by v
Slide 5: Key figures
Key figures Corporate Group Total Total Total USD million, unless otherwise stated P&C Re L&H Re Solutions Admin Re® items FY 2012 FY 2011 Q4 2012 Premiums earned and fee income 12 329 9 122 2 284 1 705 6 25 446 22 176 6 532 Net income/loss 2 990 739 196 183 93 4 201 2 626 795 Return on invest
Slide 6: P&C Reinsurance
P&C Reinsurance Strong underwriting performance Net premiums earned Combined ratio Net income, ROE USD m % USD m, % +21.6% -23.3%pts +172.1% 12 329 80.7% 2 990 ROE: 10 135 26.7% 104.0% 1 099 FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 Increase in premiums earned Net impact from nat cats in 2
Slide 7: P&C Underwriting
P&C Underwriting Strong and stable underwriting performance; combined ratios and risk-free rates trend downwards 130% 5.0% 120% 124.0 4.0% 117.0 108.4 110% 114.1 3.0% 101.1 107.8% 98.3 98.2 97.3 100% 104.0 104.7 95.4 2.0% 98.4 98.4 97.9 97.4 90% 96.8 1.0% 93.7 93.9 93.0 90.4 90.2 80% 83.1 0.0% 5-yea
Slide 8: L&H Reinsurance
L&H Reinsurance Lower investment return and unfavourable impact of pre-2004 US business Operating revenues Benefit ratio1 Net income, ROE USD m % USD m, % +5.4% +1.0%pts -55.6% 74.5% 9 948 10 488 1 664 75.5% ROE: 739 8.9% FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 The increase in premium and
Slide 9: L&H Reinsurance
L&H Reinsurance Sources of earnings including variation: lower investment yields impact operating income in USD m 45 85 -1 152 -83 -231 1 664 709 30 -111 -48 -138 739 642 -31 344 FY 2011 Tax VA, Net FY 2011 Mortality / Pre-2004 Changes Investment Other, incl. FY 2012 Net VA, Tax FY 2012 net income,
Slide 10: Corporate Solutions
Corporate Solutions Profitable growth Net premiums earned Combined ratio Net income, ROE USD m % USD m, % +18.4% -11.7%pts +142.0% 2 284 96.2% 196 ROE: 1 929 7.4% 107.9% 81 FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 Continued growth in-line with Net impact from nat cats Derivative account
Slide 11: Corporate Solutions
Corporate Solutions Implementation of growth plan on track Achievements in 2012 Outlook Demonstrated profitable Ambition to grow book to USD 4-5bn by 2015 growth and deliver low teen ROE (10-15%)1 New offices opened in Gross premium written Amsterdam, Dubai and net of intra-group transactions
Slide 12: Admin Re®
Admin Re® Strong gross cash generation Gross cash generation1 Return on investments Net income, ROE USD m % USD m, % +296% -0.1%pts -44.4% 582 ROE excl. 1 196 loss on 5.0% 4.9% sale: 7.7% -399 329 ROE: 2.6% 183 FY 2011 302 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 Total cash payments to Group of R
Slide 13: Admin Re® gross cash generation
Admin Re® gross cash generation Increased forecast 2012-2016 ~2 250 USD m 100 - 150 50 - 140 1 900 1 050 Sale of Admin 650 Re® US ~2 400 1 196 Mgt. - As at April stretch 198 ~2 500 2012 1 250 Investors' Day Base 998 Base case GCG generated since Revised base case Operational efficiency Active portfo
Slide 14: Group investment result
Group investment result Consistent and strong performance Avg. invested assets1 Return on investments Total return USD bn, basis for ROI calculation % % -0.9% -0.4%pts -3.3%pts 8.7% 123.9 122.8 5.4% 4.4% 4.0% FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 Impairments of USD 162m; ROI at 4.0%, d
Slide 15: Shareholders' equity 2012
Shareholders' equity 2012 Increase driven by strong net earnings Gov bonds -1.4 Corp bonds 0.5 USD m Sec products 0.5 Equities and others 0.7 Tax 0.0 34 000 Total 0.3 1 102 34 002 33 000 -1 134 274 -363 332 32 900 32 000 4 201 31 000 30 000 29 000 29 590 28 000 27 000 26 000 25 000 Shareholders' Net
Slide 16: Group and Business Unit capitalisation
Group and Business Unit capitalisation Capital adequacy remains very strong Total 31 December 2012, USD millions P&C L&H Corporate Swiss Re unless otherwise stated Reinsurance Reinsurance Reinsurance Solutions Admin Re® Group items Group US GAAP shareholders' equity 12 356 8 339 20 695 3 032 6 662 3
Slide 17: Group financial targets
Group financial targets Well on track ROE 700 bps above risk free average over EPS growth 10% avg. annual growth rate 5 years (2011-2015) over 5 years, adjusted for special dividends1 in % in USD2 adjusted 13.4 for proposed special 11.9 dividend: +10% 9.6 +10% 9.2 +5% 7.7 10.1 8.5 7.8 6.6 7.8 8.0 7.
Slide 18: Business update
Business update Michel M. Liès, Group CEO Annual results 2012 18
Slide 19: Key priorities for the Group CEO
Key priorities for the Group CEO As announced at Investors' Day 17 April 2012 Strategy Define the Group strategy and control implementation Financial targets Delivery on 2011-15 financial targets is the top priority and dividend Adhere to Swiss Re's dividend policy, ensure attractive payouts C
Slide 20: Key priorities for the Group CEO: achieved results in 2012
Key priorities for the Group CEO Achieved results in 2012 Very successful first year under the new corporate structure Strategy Outperformance and growth in P&C; sale of Admin Re® US Meaningful contribution from high growth markets On track towards delivering Group 2011-15 financial targets
Slide 21: P&C Re: January 2013 treaty renewals
P&C Re: January 2013 treaty renewals Successful renewals leading to profitable growth Gross premium volume1 High growth markets (HGM) – Lower solvency-related cessions in USD 9.3bn China led to reduction in premium USD 0.9bn volumes USD 8.4bn 11% 111% – Outside of China, HGM premium grew 100% to a
Slide 22: P&C Re: January 2013 treaty renewals
P&C Re: January 2013 treaty renewals Price increases of +2% for the portfolio, before impact of lower yields; economic price quality flat Risk adjusted price quality1 Economic price quality stayed flat at 110% – Takes into consideration rates, exposure Increase after claims Impact of lower inflati
Slide 23: 20% P&C quota share expiry
20% P&C quota share expiry Unique source of diversified growth 20% P&C QS: 2008-2012 P&C QS expired: 2013-2014 in USD bn Net premiums to increase by ~25% over the course of 2013-14 – Expiry increases CR by ~0.5%-point 2.8 Add'l capital requirements 2013-14 3.5 2.8 2.5 – Standard & Poor's ~USD 1.
Slide 24: Capital management
Capital management Proposal of attractive dividend plus special dividend; updated dividend policy Strong capital position allows Swiss Re to continue to pay an Swiss Re's dividend policy attractive dividend… Highest priority on growing our …and take advantage of business regular dividend with
Slide 25: Outlook
Outlook Perform and grow Continue to deliver on our unchanged Group strategy Group strategy Special emphasis on high growth markets, in all business lines P&C Reinsurance: successful renewals expected to continue Outperform our throughout 2013, expect net premium growth from expiry of QS peers
Slide 26: Appendix
Appendix Annual results 2012 26
Slide 27: Appendix
Appendix Business segment results 2012 – P&L Overall investment portfolio Business segment results 2012 – Balance sheet Fixed income securities Shareholders' equity and ROE Q4 2012 Government bonds Shareholders' equity and ROE 2012 Corporate bonds Expected nat cat premiums and clai
Slide 28: Business segment results 2012
Business segment results 2012 Profit and loss statement Re- Corporate Admin Group Consoli- Total Total Total USD millions insurance P&C Re L&H Re Solutions Re® items dation FY 2012 FY 2011 Q4 2012 Revenues Premiums earned 21 379 12 329 9 050 2 284 992 6 - 24 661 21 300 6 390 Fee income from policyho
Slide 29: Business segment results 2012
Business segment results 2012 Balance sheet Re- Corporate Admin Group Consoli- 31 December 2012, USD millions insurance P&C Re L&H Re Solutions Re® items dation FY 2012 FY 2011 Assets Fixed income securities 62 481 31 115 31 366 4 616 21 608 143 - 88 848 97 223 Equity securities 2 663 2 360 303 578
Slide 30: Shareholders' equity and ROE Q4 2012
Shareholders' equity and ROE Q4 2012 Re- Corporate Admin Group USD millions insurance P&C Re L&H Re Solutions Re® items Total1 Common shareholders' equity at 30 September 2012 19 240 11 723 7 517 2 729 6 870 3 650 32 442 Net income attributable to common shareholders 678 583 95 -24 102 39 795 Divide
Slide 31: Shareholders' equity and ROE 2012
Shareholders' equity and ROE 2012 Re- Corporate Admin Group USD millions insurance P&C Re L&H Re Solutions Re® items Total1 Common shareholders' equity at 31 December 2011 19 361 10 389 8 972 2 277 7 378 625 29 590 Net income attributable to common shareholders 3 729 2 990 739 196 183 93 4 201 Divid
Slide 32: Expected nat cat premiums and claims
Expected nat cat premiums and claims Nat cat premiums and claims1 Corporate USD m FY 2012 P&C Re Solutions Expected net premiums 2 530 2 290 240 Expected net claims 1 280 1 160 120 Actual net nat cat claims 1 152 985 167 Est. Corporate USD m FY 2013 P&C Re Solutions Expected net premiums 3 400 3 080
Slide 33: Nat cat and large man-made claims
Nat cat and large man-made claims Nat cat and man-made large claims1 Total est. Q4 2012 Corporate USD m FY 2011 net claims net change P&C Re Solutions Earthquake New Zealand February 1 292 - - - Earthquake Japan March 955 -49 -48 -1 Floods in Thailand October 696 -48 -47 -1 Total est. Q4 2012 Corpor
Slide 34: P&C Reinsurance
P&C Reinsurance Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net premiums Underwriting CR FY 2011 FY 2012 Main drivers of change earned result Q4 2012 Property 120.2% 74.2% 2012 nat cat experience within 5 795 1 495 91.6% expectation; 2011 exceptional du
Slide 35: L&H Re
L&H Re Income break-down Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY USD m 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 Net income 14 525 492 633 1 664 209 248 187 95 739 of which approximately: Net realised gains/losses1 -156 333 451 524 1 152 118 280 288 23 709 VA, pre-2000 GMDB, impact from B36 -2 22 -25
Slide 36: L&H Reinsurance
L&H Reinsurance Q4 sources of earnings including variation in USD m -31 40 -524 633 30 23 -41 -35 -53 16 32 5 118 108 95 Q4 2011 Tax benefit VA, Net realised Q4 2011 Mortality / Pre-2004 Changes Investment Other, incl. Q4 2012 Net VA, Tax benefit Q4 2012 net income, pre-2000 gains operating morbidit
Slide 37: Corporate Solutions
Corporate Solutions Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net premiums Underwriting CR FY 2011 FY 2012 Main drivers of change earned result Q4 2012 Property 133.0% 100.7% Significantly lower large losses in 755 -5 115.7% 2012 (Hurricane Sandy) tha
Slide 38: Group items
Group items Total Total Total USD m FY 2011 FY 2012 Q4 2012 Revenues Premiums earned 22 6 1 Net investment income 135 18 4 Net realised investment gains/losses -477 73 41 Other revenues 236 385 61 Total revenues -84 482 107 Expenses Claims and claim adjustment expenses 2 -14 0 Acquisition costs -8 -
Slide 39: Other assets/liabilities
Other assets/liabilities Other invested assets Accrued expenses and other liabilities USD m FY 2012 USD m FY 2012 Derivative instruments 2 284 Securities sold under agreement to 462 Equity accounted companies 3 530 repurchase Other investments 4 691 Derivative instruments 1 176 Securities purchased
Slide 40: 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 FY 2012 FY 2011 Q4 2012 Investment related income 1 263 996 117 1 234 18 -18 3 610 3 973 794 Government bonds 455 619 42 467 - - 1 583 1 999 362 Corporate bonds 142 282 40 670 1 - 1
Slide 41: 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 FY 2012 FY 2011 Q4 2012 Investment related 384 709 91 270 83 -5 1 532 1 700 137 Government bonds 703 868 52 264 3 - 1 890 1 912 178 Corporate bonds 50 57 21 19 -16 - 131 36 28 Se
Slide 42: Net unrealised gains/losses
Net unrealised gains/losses Corporate Admin Total Total USD m P&C Re L&H Re Solutions Re®1 Group items FY 2012 FY 2011 Government bonds 847 1 598 58 1 313 - 3 816 5 195 Corporate bonds 229 636 59 1 381 - 2 305 1 787 Securitised products 49 103 22 80 5 259 -195 Equities 234 42 37 - - 313 53 Other 243
Slide 43: Return on investments basis
Return on investments basis Investments included in the RoI calculation USD bn FY 20111 FY 2012 Where to find? Total investment portfolio 173.6 163.7 Slide 45 Unit-linked investments -19.7 -22.7 Slide 45 With-profit business -3.3 -3.6 Slide 45 Total (excl. unit-linked and with-profit) 150.6 13
Slide 44: 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®2 items dation FY 2012 FY 2011 Q4 2012 Net investment income 1 263 996 117 1 234 18 -18 3 610 3 973 794 Net realised gains/losses (incl. fx) 384 709 91 270 83 -5 1 532 1 700 137 Other revenu
Slide 45: Overall investment portfolio
Overall investment portfolio 63% invested in cash, short-term investments or government bonds Other - Other - investment insurance Cash and cash related related equivalents 9% Mortgages 1% 7% USD bn End FY 2012 and other Short-term loans investments Balance sheet values 163.7 Securitised 2% 14% prod
Slide 46: Fixed income securities
Fixed income securities USD bn End FY 2011 End FY 2012 Balance sheet values 101.3 93.5 Unit-linked investments -2.4 -2.6 With-profit business -1.7 -2.1 Balance sheet values (excl. unit-linked and with-profit business) 97.2 88.8 Government bonds1 Corporate bonds2 Securitised products3 65.6 58.0 23.5
Slide 47: Government bonds
Government bonds High quality portfolio S&P rating USD m 31 Dec 20121 End FY 2012 % of Total Eurozone other: USD 1 224 EEC/EU United States AA+ 18 403 31.7% super- sovereign United Kingdom AAA 16 129 27.8% 3% Other 8% Canada AAA 4 318 7.4% EIB Australia AAA 1 410 2.4% (European Austria Investment 46
Slide 48: Corporate bonds
Corporate bonds Moderate re-risking while maintaining high quality End FY % of End FY USD m 2012 Total 2012 6% 52% 2% United States Resources 2 754 11.6% Pfandbriefe / 19% 3% United Kingdom covered bonds Basic industries 1 155 4.8% Australia Banks 47% 6% Canada Cyclical consumer goods 643 2.7% Speci
Slide 49: Securitised products
Securitised products Highly rated portfolio 1% End FY End FY BB and Est. % 15% USD m, market values 2011 2012 Aaa Aa A BBB below par CMBS 2 037 3 175 1 467 330 603 319 456 103% 48% RMBS 3 817 990 302 103 303 93 189 84% 36% Other ABS 1 634 2 408 1 678 271 275 123 61 101% Other Securitised 119 100 14
Slide 50: Equities and Alternative Investments
Equities and Alternative Investments New equity purchases Equities Listed Equities Exchange-traded funds by sector Non-Cyclical Consumer Goods USD m, market values End FY 2011 End FY 2012 3% 2% 1% Financials 5% Information Technology Listed Equities 1 540 2 626 6% 33% Cyclical Services Strategic Hol
Slide 51: Investment mix and mid-term plan
Investment mix and mid-term plan 100% 3% 0-5% 0-5% 1% 0-5% 1% 0-5% 3% 0-5% 4% 1% 0-5% 8% 0-5% 7% 5-15% 5-15% 5-10% 90% 13% 19% 10-30% 80% 9% 10-20% 21% 20% 20-30% 15-30% 47% 5% 7% 45-55% 70% 0-10% 5-15% 6% 5% 5-10% 60% 5-10% 50% 41% 3% 32% 0-10% 40-50% 53% 44% 40% 35-55% 40-60% 35-55% 30% 40% 35-50%
Slide 52: Sensitivities
Sensitivities Estimated impact on Estimated impact on shareholders’ economic available USD m Scenario equity capital Fall in market values Listed equity investments of 25% -657 -657 Fall in market values Private equity investments1 of 25% -804 -804 Fall in market values Hedge Funds investments o
Slide 53: Shareholders' equity Q4 2012
Shareholders' equity Q4 2012 USD m 34 000 101 1 102 34 002 33 000 -25 -413 795 32 900 32 000 32 442 Gov bonds -0.4 Corp bonds 0.0 31 000 Sec products 0.0 Equities and 30 000 others -0.2 Tax 0.2 29 000 Total -0.4 28 000 27 000 26 000 25 000 Common Net income Other Foreign currency Net change in Commo
Slide 54: Swiss Re's capital structure
Swiss Re’s capital structure USD bn Senior long-term financial debt 45 Hybrid capital 75% Mandatory convertibles CPCI (2009) and contingent capital instruments (part of shareholders' equity) 5.0 Common shareholders' equity 0.7 4.3 Senior financial debt to total capital 3.0 Hybrid to total capital 1.
Slide 55: Proposed capital motions for AGM 2013
Proposed capital motions for AGM 2013 Increase regular dividend to CHF 3.50 per share and pay out a special dividend of CHF 4.00 per share – Both dividends to be paid in the form of withholding tax exempt distributions of legal reserves from capital contributions; such reserves totalling CHF 7.8bn
Slide 56: Number of shares
Number of shares in millions FY 2012 Total shares 370.7 of which Treasury shares and shares reserved for 27.5 corporate purposes Shares outstanding1 (as at 31 December 2012) 343.2 Shares outstanding1 (weighted average) 343.4 1 Shares outstanding is the number of shares eligible for dividends and is
Slide 57: Premiums by country
Premiums by country 2012 Gross premiums written and fees assessed against policyholders by country1 Total USD m Life&Health Non-Life FY 2012 USA 4 554 6 743 11 297 UK 1 598 1 907 3 505 France 198 2 151 2 349 China 92 2 009 2 101 Australia 1 020 885 1 905 Canada 927 544 1 471 Germany 191 1 076 1 267
Slide 58: Exchange rates
Exchange rates Average rates EUR/USD GBP/USD CAD/USD CHF/USD Gross premiums written FY 2012 split by main FY 2011 1.39 1.60 1.01 1.13 currencies Q3 2012 1.28 1.58 1.00 1.06 Other 13% FY 2012 1.28 1.58 1.00 1.06 CAD Change FY 2011/FY 2012 -7.91% -1.25% -0.99% -6.19% 5% AUD USD Change Q3 2012/FY 2012
Slide 59: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 15 March 2013 Publication of Annual Report 2012 and EVM 2012 18 March 2013 AGM Briefing Call Conference call 10 April 2013 149th Annual General Meeting Zurich 02 May 2013 First Quarter 2013 results Conference call 24 June 2013 Investors' Day Zurich 08
Slide 60: 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