Swiss Re Ag · SIX:SREN
Swiss Re — Investor Presentation (November 2017)
29 slides from Swiss Re's investor presentation, Nov 21, 2017
Slide 1: Global insurance review 2017 and outlook 2018/2019
Global insurance review 2017 and outlook 2018/2019 London | 21 November 2017 Dr. Kurt Karl, Chief Economist, Swiss Re Daniel Ryan, Head of Research, Swiss Re Institute Astrid Frey Kaufmann, Chief European Economist, Swiss Re Institute
Slide 2: Agenda
Agenda Introduction The macroeconomic environment: cyclical upswing continues Non-life: cat losses cause earnings and capital event in reinsurance Life re/insurance: accepting the challenge Q&A sigma Research 2
Slide 3: The macroeconomic environment: cyclical upswing continues
The macroeconomic environment: cyclical upswing continues sigma Research 3
Slide 4: Benign economic outlook: cyclical upswing continues
Economic The macroeconomic environment Benign economic outlook: cyclical upswing continues Real GDP growth in select regions, 2015-2019F 8% 6% 4% 2% 0% -2% World Latin America Eastern Europe North America Western Europe Emerging Asia and Caribbean 2015 2016 2017E 2018F 2019F Source: Swiss Re Institu
Slide 5: Implications for inflation and interest rates
Economic The macroeconomic environment Implications for inflation and interest rates • Inflation remains moderate in most economies, but is expected to increase gradually, particularly in the US. • In the UK, inflation is probably close to its peak, but likely to remain elevated. • US Fed is expecte
Slide 6: Global economic risk map
Economic The macroeconomic environment Global economic risk map = Upside Risk (US fiscal stimulus, Europe, China) Disorderly Brexit Euro area Trade war destabilisation China hard landing = QE tapering = = Trend over recent months Geopolitical risks Source: Swiss Re Institute sigma Research
Slide 7: Monetary policy – risk of disruption from QE tapering?
Economic The macroeconomic environment Monetary policy – risk of disruption from QE tapering? Issuance and purchases of US/Euro area government bonds, 4-quarter sums in % GDP We do not expect any disruption from QE tapering in our baseline scenario. Source: Swiss Re Institute. sigma Research 7
Slide 8: Concerns over elevated Chinese corporate debt persist
Economic The macroeconomic environment Concerns over elevated Chinese corporate debt persist Non-financial sector debt in China % GDP, Q1 2007 – Q2 2017 Some recent success in containing further corporate debt build-up Risk of a hard landing of the Chinese economy remains a key risk to global gr
Slide 9: Summary
Economic The macroeconomic environment Summary • Global growth likely to remain steady. • Inflation risks are contained, but rising (US, UK). • Gradual increase in US interest rates to push global yields moderately higher. • Some upside risk to growth from fiscal stimulus. • Key downside risks: – Ch
Slide 10: Non-life: cat losses cause earnings and capital event in reinsurance
Non-life: cat losses cause earnings and capital event in reinsurance sigma Research 10
Slide 11: US: Nat cat losses and higher claims in casualty cause deterioration in underwriting results
Non-Life The primary non-life insurance market US: Nat cat losses and higher claims in casualty cause deterioration in the underwriting results US combined ratio for FY 2017 to be expected at around 109% due to the hurricane losses • For H1 2017, the industry combined ratio deteriorated to 100.8%. •
Slide 12: European combined ratio: stable UW results on average
Non-Life The primary non-life insurance market European combined ratio: stable UW results on average A mixed picture in terms of levels of underwriting results • Underwriting results in motor insurance deteriorated in most major countries. • UK results are impacted by the Ogden rate changes which re
Slide 13: Global: Softening of commercial insurance rates eased in 2017
Non-Life The primary non-life insurance market Global: Softening of commercial insurance rates eased in 2017 Rates fell for the 17th consecutive quarter • Decline is more pronounced in property than in casualty and financial & professional. • From a regional perspective, the US casualty rates starte
Slide 14: Non-life industry ROE declined to 3% from 6% in 2016
Non-Life The primary non-life insurance market Non-life industry ROE declined to 3% from 6% in 2016 Overall profits declined further in 2017, driven by cat losses in the US • Soft underwriting conditions and low investment yields have dented overall profitability since 2013/14. • Overall underwritin
Slide 15: Growth prospects are improving
Non-Life The primary non-life insurance market Growth prospects are improving Global non-life premiums are forecast to increase by around 3% in real terms in 2018 and 2019 • The positive rate dynamics are likely to add to primary insurance premium growth in the following years, providing some upside
Slide 16: Reinsurance profitability has been declining since 2013
Non-Life Re The non-life reinsurance market Reinsurance profitability has been declining since 2013 due to soft underwriting conditions 2017 results have been significantly impacted by the Hurricanes Harvey, Irma and Maria • Based on current claims estimates, the combined ratio for 2017 is expected
Slide 17: Growth prospects are improving
Non-Life Re The non-life reinsurance market Growth prospects are improving Global non-life reinsurance premiums are forecast to increase to around 4% in real terms by 2019 • In 2018, advanced markets real non-life reinsurance premium growth are expected to reflect a moderate hardening of rates and s
Slide 18: Summary of non-life reinsurance market
Non-Life Re The non-life reinsurance market Summary of non-life reinsurance market Third quarter 2017 natural catastrophe losses highlight the recent underpricing of insurance risks – Since 2012, global reinsurance prices have consistently declined, led by US and European Cat price reductions. – Pro
Slide 19: Life & Health re/insurance: accepting the challenge
Life & Health re/insurance: accepting the challenge sigma Research 19
Slide 20: Global life insurance premiums up by 3%
Life The traditional primary life insurance market Global life insurance premiums up by 3% Global life premiums are estimated to have risen by 3% in 2017 in real terms, up from 2% in 2016, mostly due to emerging markets • North America: -2% (driven mainly by the US) • Western Europe: premiums stagna
Slide 21: Profitability remains under pressure
Life The traditional primary life insurance market Profitability remains under pressure Lower investment income due to low interest rates remains a significant headwind for insurers • Industry profitability remains under pressure. • Indicators suggest some improvement in the outlook, but profitabili
Slide 22: Reallocation of investments towards higher yield assets
Life The traditional primary life insurance market Reallocation of investments towards higher yield assets Insurers continue to reconfigure their investment portfolios in search of higher yields • Low investment yields and the introduction of risk-based solvency regimes have impacted insurers’ inves
Slide 23: The medical expense insurance market
Health The medical expense insurance market The medical expense insurance market Global medex premiums are estimated to have grown by 4% in 2017, down from 5% in 2016 • Slowdown due to weaker results in the US (after period of strong growth due to Affordable Care Act). • Premiums were up an estimate
Slide 24: Growth opportunity in emerging markets
Health The medical expense insurance market Growth opportunity in emerging markets The incidence of chronic diseases (eg, cardiovascular disease, cancer, and diabetes) is rising Respondents’ Willingness To Pay for changes in Critical Illness product features compared to reference options specified •
Slide 25: Underlying growth in global cessions remains modest
Life Re The life reinsurance market Underlying growth in global cessions remains modest Global cessions picked up sharply in 2016, but this was due largely to a one-off US transaction • Underlying growth in global reinsurance premiums in 2017 remains modest and this is expected to continue, with wea
Slide 26: Growth opportunities through Solvency II and longevity risk transfers
Life Re The life reinsurance market Growth opportunities through Solvency II and longevity risk transfers Global cessions are forecast to grow only marginally over the next two years • Solvency II has underpinned interest in reinsurance: boost available capital, reduce required capital or to economi
Slide 27: Q&A
Institute sigma Research 27
Slide 28: sigma Research
@ Swiss Re Institute sigma Research 28
Slide 29: Legal notice
Legal notice ©2017 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re. The information and opinions contained in the presentati