Swiss Re Ag · SIX:SREN
Swiss Re — Investor Presentation (April 2019)
68 slides from Swiss Re's investor presentation, April 2019
Slide 1: Swiss Re – Leading Global Re/Insurer
Swiss Re – Leading Global Re/Insurer Company presentation as of April 2019
Slide 2: Swiss Re – Leading Global Re/Insurer
Swiss Re – Leading Global Re/Insurer Overview and Capital P&C and L&H Corporate Group Strategy Management Reinsurance Solutions page 4 page 23 page 31 page 41 Life Asset Global Re/Insurance Capital Management & Protection Gap page 46 page 51 page 58 Swiss Re Group | Company presentation | April 2019
Slide 3: A truly global reinsurer… Profitable long-term growth opportunities
A truly global reinsurer1… Profitable long-term growth opportunities • Reinsurance market growth of 4-5%3 p.a. 21% • Differentiation through transactions, solutions and core Group financial 47% • No 1 reinsurer in High Growth Markets targets • Life Capital open book 2015-18 GPW CAGR of 30% over-the-
Slide 4: Overview and Group Strategy
Financial highlights Overview and Group Strategy Swiss Re Group | Company presentation | September 2018 4
Slide 5: Swiss Re Group at a glance
Swiss Re Group at a glance Swiss Re is a leading and highly diversified global re/insurer, founded in Zurich (Switzerland) in 1863 • The financial strength1 of the Swiss Re Group is currently rated: Standard & Poor’s: AA- (stable); Moody’s Aa3 (stable); A.M. Best: A+ (stable) • Swiss Re Group’s Swis
Slide 6: Swiss Re is well diversified across geographic regions and business segments
Swiss Re is well diversified across geographic regions and business segments Net premiums earned1 by segment Net premiums earned1 by region Economic Net Worth2 by segment Life Capital Life Capital Corporate 5% 12% Solutions Asia 11% 21% Corporate P&C Re Americas Solutions P&C Re 38% 47% 9% 47% L&H R
Slide 7: Premium development by line of business and geography
Premium development by line of business and geography Premiums earned and fee income by line of business Premiums earned and fee income by geography (USD bn, CAGR in %) (USD bn, CAGR in %) 34.5 34.5 +5% +5% 14% 21% 25.4 25.4 28% 12% 20% 32% 30% 10% 42% 11% 27% 21% 47% 38% 26% 21% 2012 2018 2012 2018
Slide 8: Our near-term priorities remain unchanged
Our near-term priorities remain unchanged Swiss Re’s strategic framework Near-term priorities Group financial targets over-the-cycle I systematically allocate capital to risk pools / Large & tailored transactions revenue streams Growth through Corporate Solutions RoE ≥ II III systematic capital allo
Slide 9: Based on three differentiation drivers, we have built leading insurance businesses
Based on three differentiation drivers, we have built leading insurance businesses Client Risk Capital Access Knowledge Strength Reinsurance Corporate Solutions Life Capital P&C Reinsurance L&H Reinsurance • Top 5-10 in Excess Layer market • Leading UK life & pension • #1 global property • Top 2 glo
Slide 10: We are benefiting from a more positive current environment and promising long-term opportunities
We are benefiting from a more positive current environment and promising long-term opportunities Current market environment improved Moderate improvements in P&C …to benefit P&C Reinsurance and Corporate Solutions 5% pricing… overall market Gradually increasing growth …to benefit the return profile
Slide 11: Focus areas of Annual Results 2018
Focus areas of Annual Results 2018 • Group net income of USD 421m for FY 2018, despite the 2018 large natural catastrophes the Impacted by large fourth highest year on sigma records in terms of large loss burden for the insurance industry losses and recent • Group investment result impacted by chang
Slide 12: Second consecutive year with significantly higher than expected large losses
Second consecutive year with significantly higher than expected large losses Group ROE 700bps above 10yr US govt. bonds Group Net Income Impact of change in US GAAP accounting guidance • After benign nat cat loss years from 2012-2016 the USD bn insurance industry 4.6 14% experienced two elevated 4.4
Slide 13: Swiss Re’s strong economic earnings track record 2014-2018
Swiss Re’s strong economic earnings track record 2014-2018 EVM profit USD 608m EVM profit Economic value is created if new business avg. 2014 - 2018 total economic return generated USD 503m Total contribution to for shareholders is above expected total return avg. 2014 - 2018 ENW Represents total ec
Slide 14: Swiss Re’s total shareholder return is best tracked by ENW developments
Swiss Re’s total shareholder return is best tracked by ENW developments ENW per share growth vs. total shareholder return1 ENW per share vs. share price development 130 120 300% Total return to shareholders 250% ENW per share growth 2 110 200% 100 150% 90 100% 50% 80 0% 70 ENW per share growth2 Tota
Slide 15: Swiss Re proposes attractive capital management actions
Swiss Re proposes attractive capital management actions Regular dividend per share (CHF) +3% +12% 12% regular dividend per share increase 5.00 5.60 4.85 Rebasing supported by long-term economic earnings and sustainable capital generation 2017 2018 20191 Share buy-back programme (CHF bn) New share bu
Slide 16: Swiss Re’s capital repatriation remains peer-leading
Swiss Re’s capital repatriation remains peer-leading Dividends and share buy-back per share (CHF, CAGR in %) +17% 9.20 8.65 8.90 8.00 8.25 7.90 7.50 1 4.20 3.30 4.40 3.40 3.30 4.15 4.00 1 3.00 5.60 4.60 4.85 5.00 3.85 4.25 3.50 2012 2013 2014 2015 2016 2017 2018 2019E Ordinary dividends Special divi
Slide 17: Value creation with increasing book value and paid dividends
Value creation with increasing book value and paid dividends Book value per share and accumulated paid dividends (CHF, CAGR in %) +6% 137.99 138.57 131.92 119.62 121.79 30.35 35.20 18.50 40.20 25.75 90.76 93.26 3.00 10.50 107.64 103.37 101.12 96.04 87.76 91.72 82.76 2012 2013 2014 2015 2016 2017 201
Slide 18: Swiss Re maintains leadership in sustainability
Swiss Re maintains leadership in sustainability Key actions in 2018 Close to Responsible 100% • Early mover in switching to ESG benchmarks in equity and credit markets investing • USD 1.6bn of green bonds as of end FY 2018 assets considering ESG criteria Sustainable underwriting • • Implemented ther
Slide 19: R&D builds on our thought leadership position
R&D builds on our thought leadership position, bringing us closer to the needs of our clients How R&D drives value at Swiss Re: Drivers for underwriting outperformance Insurance “beta” ~450 FTE in R&D improves top down Target Strategic 13 R&D teams capital allocation leading to Liability Asset 5
Slide 20: Swiss Re’s tech strategy is embedded in our business strategy
Swiss Re’s tech strategy is embedded in our business strategy and ensures effective innovation management 1 OUR CLIENTS OURSELVES 2 Increase our clients’ competitiveness Improve our value chain Provide tools and solutions for clients’ value chains Apply technology to Swiss Re’s value chain Examples:
Slide 21: Swiss Re outperforms its peers with higher margins
Swiss Re outperforms its peers with higher margins Peer-leading margins • The differentiation approach has enabled Swiss Re to generate higher US GAAP net operating margins average 2012-18 margins and outperform 12% 7% • Swiss Re outperformed peers on average by 6%pts since 2012, driven by underwrit
Slide 22: We are committed to our over-the-cycle Group financial targets
We are committed to our over-the-cycle Group financial targets Group return on equity Group ENW per share growth2 24.6% 13.7% 13.7% 17.0% 13.4% 10.5% 10.6% 11.0% 9.6% 10.8% 9.4% 9.6% 8.8% 9.2% 9.4% 9.4% Rf + 10% 10% 10% 10% 10% 10% 10% 10% 700 7.2% bps1 5.4% 4.4% 1.0% 1.4% 2012 2013 2014 2015 2016 2
Slide 23: Capital Management
Financial highlights Capital Management Swiss Re Group | Company presentation | September 2018 23
Slide 24: We remain focused on our capital management priorities
We remain focused on our capital management priorities I II Swiss Re’s capital management priorities remain unchanged Group SST ratio SST 18 SST 19 USD 7.9bn I. Ensure superior capitalisation at all times and maximise financial 269% 251% ordinary dividend (FY 14 to FY 18) flexibility Rating Payout 1
Slide 25: Group capital position remains very strong
Group capital position remains very strong, even after significant large losses and continued peer-leading capital repatriation to shareholders SST ratio development (USD bn, %) • Group SST ratio remains very strong and comfortably above the 220% target level 269% 261% 262% 80.0 251% • The SST ratio
Slide 26: Swiss Re’s capital strength remains resilient to market movements
Swiss Re’s capital strength remains resilient to market movements Group SST sensitivities • Swiss Re uses a central proprietary risk model to Resulting estimated Group SST ratio 2019 measure capital requirements, define risk tolerance, risk limits and assess stress test impacts Equity markets (-25%)
Slide 27: Swiss Re maintains a leading capital position in the reinsurance sector and industry
Swiss Re maintains a leading capital position in the reinsurance sector and industry Group SST to Solvency II walk1 >280% 311% 251% 239% 210% Group SST Risk measure Modelling differences Valuation Eligibility of capital Deferred taxes Group Solvency II Average of Average of ratio 2019 (1-year risk)
Slide 28: Strong solvency capital generation over the last five years
Strong solvency capital generation over the last five years Swiss Re’s solvency capital generation – five year aggregated view from Group SST 2014 to 2019 More details on following slides 17.1 Capital management -2.8 12.8 -1.5 -3.2 -14.0 -4.4 Economic earnings Capital deployment Other items (incl. f
Slide 29: Swiss Re’s target capital structure and financial flexibility
Swiss Re’s target capital structure and financial flexibility is supported by the Group’s strong funding platforms Implementation and maintenance of target capital structure USD bn Established funding platforms in all Business Units to fund capital & liquidity requirements Corporate Life Group Reins
Slide 30: Peer-leading capital repatriation
Peer-leading capital repatriation USD bn in year paid Ordinary dividends Special dividends and share buy-backs USD 7.9bn USD 6.1bn 1.5 1.6 1.6 1.6 1.7 1.5 1.3 1.1 1.1 1.0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019E2 Per share in CHF 4.25 4.60 4.85 5.00 5.60 4.40 3.30 3.40 3.80 3.35 14.0 Swiss
Slide 31: P&C and L&H Reinsurance
Financial highlights P&C and L&H Reinsurance Swiss Re Group | Company presentation | September 2018 31
Slide 32: We seek to benefit from a more positive environment and promising long-term opportunities
We seek to benefit from a more positive environment and promising long- term opportunities in the reinsurance market Market environment improved Moderate improvements in P&C reinsurance pricing developments 5% Gradually increasing interest rates benefit our long tail lines in Life and Casualty overa
Slide 33: Differentiation is at the heart of what we do
Differentiation is at the heart of what we do Core Transactions Solutions Differentiation Simplify and drive Add value to clients’ Deliver innovative deals by efficiencies in our original business by combining our knowledge traditional business providing tech enabled and capital solutions We acces
Slide 34: We leverage technology in solutions to add value to our clients’ original business
We leverage technology in solutions to add value to our clients’ original business and value chain Selected examples of commercialised solutions in P&C and L&H Reinsurance Pilot / Proof of concept With clients and partners Automotive Parametric Smart SwiftRe® Magnum Solutions Homes Development Build
Slide 35: Swiss Re’s reinsurance client franchise represents the biggest source of our competitive advantage
Swiss Re’s reinsurance client franchise represents the biggest source of our competitive advantage We have strong direct relationships with our customers… Direct relationships drive our access to large & tailored transactions P&C Reinsurance L&H Reinsurance EVM profit - new business (USD m) % of pre
Slide 36: We have significantly grown and diversified our portfolio
We have significantly grown and diversified our portfolio Portfolio developments 2010-18 EVM premium (USD bn) Overall portfolio Americas EMEA Asia CAGR of 7% from CAGR 21% 2010 to 2018 15.4 CAGR 7% 12.6 CAGR 4% 3% 43% 10.9 34% 16% Balanced global portfolios 7.4 7.8 3% 22% 1% 12% 17% 31% 15% 50% 36%
Slide 37: P&C Reinsurance results
Net premiums earned Net operating margin1 (%) Combined ratio (%) 111.5 104.0 +5.6pts 4.3 93.5 2.9 USD 16.1bn 83.8 83.7 80.7 85.7 8.9 7.8 2012 2013 2014 2015 2016 2017 2018 in 2018 -3.9 -6.4 • Net impact of large nat cat events in 2018 5.0%pts above USD 16.7bn in 2017 -6.3 expectations. Favourable pr
Slide 38: P&C Reinsurance strategy in action
P&C Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net earned premium, USD bn) US GAAP operating expenses (USD m) -3.9% • Leveraging technology to achieve efficiency Americas 1 159 1 114 across Swiss Re’s value chain 22% EMEA 2017 2018 Asia 48% SOLUTIONS – s
Slide 39: L&H Reinsurance results
Net premiums earned Net operating margin1 (%) Running yield and ROI (%) 3.8 3.5 3.5 3.4 3.3 3.4 3.2 -3.7pts 13.1 4.7 4.1 4.3 3.4 3.6 3.7 3.2 USD 12.7bn 4.8 9.4 3.3 in 2018 2012 2013 2014 2015 2016 2017 2018 13.7 Running yield ROI 11.4 USD 11.9bn in 2017 -5.4 -5.3 • Slightly increasing running yield
Slide 40: L&H Reinsurance strategy in action
L&H Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net earned premium, USD bn) US GAAP operating expenses (USD m) 0.5% • Despite strong growth in the last years, 754 758 expense base remained stable Americas 26% EMEA 2017 2018 43% Asia SOLUTIONS – selected e
Slide 41: Corporate Solutions
Financial highlights Corporate Solutions Swiss Re Group | Company presentation | September 2018 41
Slide 42: 2018 Corporate Solutions result impacted by large man-made and nat cat losses
2018 Corporate Solutions result impacted by large man-made and nat cat losses Net premiums earned Net operating margin1 (%) Combined ratio (%) 133.4 +12.4%pts 117.5 1.9 101.1 7.4 5.4 96.2 95.1 93.0 93.2 USD 3.9bn in 2018 -11.7 -18.4 2012 2013 2014 2015 2016 2017 2018 -19.2 -11.1 • Profitability cont
Slide 43: Addressing Corporate Solutions underperformance
Addressing Corporate Solutions underperformance Drivers of underperformance Actions taken • Difficult market environment: man- • Portfolio pruning started in 2017, made losses above expectations continued in 2018 and and price improvements not yet intensifying in 2019 sufficient after years of decli
Slide 44: Corporate Solutions remains focused on key priorities
Corporate Solutions remains focused on key priorities Performance improvement actions Increase productivity Primary Lead • US General Liability pruning actions started 18 • A combination of process improvements, cost • Extension of own domestic and international months ago; time lag for improvements
Slide 45: Corporate Solutions has shown disciplined performance within its peer-group
Corporate Solutions has shown disciplined performance within its peer- group 2012 – 2017 Average 2012 – 2018 2012 2013 2014 Combined ratio Combined ratio 2015 2016 2017 Gross premiums growth Corporate Solutions (Combined Ratio incl. Total financial contribution - TFC) Corporate Solutions (Combined R
Slide 46: Life Capital
Financial Life Capitalhighlights Swiss Re Group | Company presentation | September 2018 46
Slide 47: Life Capital business, products and clients
UK life & pension closed book Group protection solutions through White-labelled individual protection products Business consolidator intermediaries through distributors Protection, annuities, unit-linked Products insurance Group life, disability, income protection Individual life, health and non-lif
Slide 48: Enhancing access to risk pools with iptiQ platform
ReAssure developments in 2018… …complemented by open book evolution 2019 outlook Focus on # new policies ReAssure IPO preparation # iptiQ written in iptiQ elipsLife premium distribution 120k volume (USD m) partners Enhancing access 19 450 Exceptional GCG: USD 818m in 2018 to risk pools with iptiQ
Slide 49: Exceptional Life Capital GCG; open book growth in line with expectations
Exceptional Life Capital GCG; open book growth in line with expectations Gross cash generation (USD m) Open book - Gross premiums written (USD m) 1196 998 1 567 945 818 CAGR 30% 721 1 039 521 543 868 709 2012 2013 2014 2015 2016 2017 2018 2015 2016 2017 2018 • Exceptional gross cash generation (GCG)
Slide 50: Life Capital open book businesses continue to grow
Life Capital open book businesses continue to grow 2016 2018 Weekly policies sold1 545 2 755 ~ 5x # of Expansion of access to distribution partners 5 19 ~ 4x attractive risk pools # of countries 5 7 +2 GPW2 (USD m) 247 412 + 67% Ambition to continue # of clients < 8 000 ~ 12 000 + 50% growing at an
Slide 51: Asset Management
Financial highlights Asset Management Swiss Re Group | Company presentation | September 2018 51
Slide 52: Swiss Re’s investment portfolio
Swiss Re’s investment portfolio Other investments (incl. policy Cash and cash equivalents loans) Mortgages and other 4% 5% End loans Short-term investments 4% 4% USD bn FY 2018 Equities Balance sheet values 153.3 5% Unit-linked investments -25.9 Government bonds 41% With-profit business -4.8 Assets
Slide 53: Return on investments and portfolio positioning
Return on investments (ROI) Investment portfolio positioning (USD bn) Net investment income (USD m, LHS) Running yield (%, RHS) 140 128.0 122.6 120 9.8 3.2 3.2 3.3 10.2 4 000 3.5 2.8% 3.3%1 3.0 2.9 2.9 2.9 100 3.0 52.9 49.3 3 000 80 2.5 in 2018 2.0 60 2 000 3 610 3 386 3 396 1.5 3 178 3 099 3 132 40
Slide 54: High quality portfolio drives the Group’s sustainable investment result
High quality portfolio drives the Group’s sustainable investment result Credit bonds: USD 45.1bn Fixed income impairment trend Below investment grade credit bonds represent approximately half of peer average of 9% USD m bps 4% 3% 60 Investment grade rated Typical default rate assumption (Single A)
Slide 55: Fixed income securities
Fixed income securities Government Credit USD m bonds bonds End FY 2017 54 658 47 128 • Decrease in government bonds driven by foreign End exchange impacts as well as net sales and market value FY 2018 50 876 45 076 losses stemming from rising interest rates across the US and UK • Credit bonds inclu
Slide 56: Equities and alternative investments
Equities and alternative investments Equity securities Exchange-traded funds by sector Non-Cyclical Consumer Goods End End Financials 1% 1% USD m FY 2017 FY 2018 3%2% 1% 6% Information Technology Equity securities 3 326 2 695 6% Cyclical Services General Industrials Private equity 1 382 1 463 7% 48%
Slide 57: Swiss Re’s approach to responsible investing
Swiss Re’s approach to responsible investing: we consistently integrate ESG criteria across all asset classes Switch to broad-based ESG benchmarks Enhancement focusing on higher ESG-rated investments Focus on themes and create related Inclusion mandates, such as green bonds, renewable or social infr
Slide 58: Global Re/Insurance & Protection Gap
Financial highlights& Protection Gap Global Re/Insurance Swiss Re Group | Company presentation | September 2018 58
Slide 59: Global cat losses totaled USD 165 billion in 2018, and 49% was uninsured
Global cat losses totaled USD 165 billion in 2018, and 49% was uninsured Swiss Re Group | Company presentation | April 2019 59
Slide 60: Disaster losses still mostly uninsured
Disaster losses still mostly uninsured 500 450 400 350 Economic losses = 300 insured + 250 uninsured losses 200 150 100 50 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2018 Insured losses Not insured 10-year moving average insured losses 10-year moving average total economic losses Source: Sw
Slide 61: Insured losses in 2018: USD 85 billion
Insured losses in 2018: USD 85 billion Insured losses, 1970-2018 (USD bn at 2018 prices) Hurricanes 160 Japan, NZ Harvey, Irma, earthquakes, Hurricanes Thailand flood 140 Katrina, Rita, Wilma 120 100 Camp Fire, Hurricanes Ivan, Hurricane Typhoon Jebi Charley, Frances Sandy 80 Winter Storm Lothar Hur
Slide 62: Direct premiums as a % of GDP, 2017
Direct premiums as a % of GDP, 2017 United States • Swiss Re’s developed insurance 4% Canada “S-Curve” illustrates the various Switzerland Average advanced markets stages of insurance penetration Germany • Insurance penetration rises most sharply in middle-income 3% Spain countries South Africa • Wi
Slide 63: Premium potential > USD 500 billion
Lines of business1 (premium equivalents) Property Cat Property Non-Cat Premium ~USD 155 bn ~USD 80 bn potential > USD 500 billion and growing Agro Mortality ~USD 30 bn ~USD 270 bn Source: Swiss Re Institute 1 Excluding Morbidity, Other P&C and Emerging Risks; Protection Gap for Property Cat, Propert
Slide 64: How to close the 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 Damaged Insurance schemes and pools uninsured Insured private a
Slide 65: Swiss Re Public Sector Solutions enables the Group to broaden our client base
Swiss Re Public Sector Solutions enables the Group to broaden our client base and address the protection gap Florida United Kingdom Turkey Bangladesh United States Hurricane risk Flood risk Earthquake pool Flood insurance • First dedicated public sector Flood risk team in the reinsurance Caribbean i
Slide 66: Swiss Re Group | Company presentation | April 2019
Swiss Re Group | Company presentation | April 2019 66
Slide 67: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 2019 17 April 155th Annual General Meeting Zurich 3 May Q1 2019 Key Financial Data Conference call 23 May Management Dialogues London 31 July H1 2019 Results Conference call 31 October 9M 2019 Key Financial Data Conference call 25 November Investors’
Slide 68: 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