Swiss Re Ag · SIX:SREN
Swiss Re — Investor Presentation (November 2020)
26 slides from Swiss Re's investor presentation, Nov 11, 2020
Slide 1: sigma 7/2020: Global economic and insurance outlook
sigma 7/2020: Global economic and insurance outlook Dr. Jérôme Haegeli, Group Chief Economist 11 November 2020 1
Slide 2: It's all about…
It’s all about… Dr. Jérôme Haegeli | November 2020 2
Slide 3: Global macro outlook
Global macro outlook “We need a policy re-set. Today's crisis is an opportunity to build back better, including targeted fiscal spending“ Dr. Jérôme Haegeli, Group Chief Economist of Swiss Re 3
Slide 4: Economic Outlook: Fragile and protracted recovery
Economic Outlook: Fragile and protracted recovery Swiss Re Institute Consensus Protracted, 2019 2020e 2021F 2022F 2020e 2021F fragile and Real GDP (% change) stimulus- US 2.3 -4.1 3.5 2.3 -4.0 3.7 dependent Eurozone 1.3 -7.3 4.0 3.0 -7.5 5.3 recovery UK 1.5 -11.0 5.6 2.3 -10.1 5.7 China 6.1 2.3 7.4
Slide 5: The pandemic macro clock: Not looking good but no return to spring extremes
The pandemic macro clock: Not looking good but no return to spring extremes SRI Pandemic Macro Clock SRI GDP shortfall index 2.0 5 (4) (1) 0 -5 1.5 Germany -10 G7 US -15 Rt Rt > 1 UK China -20 1.0 -25 Rt < 1 -30 Easing Tightening (2) (3) Feb Mar Apr May Jun Jul Aug Sep Oct 0.5 China G7 Germany UK US
Slide 6: The cyclical and long-term macro picture
The cyclical and long-term macro picture Long-term economic consequences for now overshadowed by massive public policy stimulus Cyclical Structural picture picture Short-term Longer-term Latest* Drivers outlook outlook • Higher debt levels Real GDP growth, More • Looming risk of “zombification” of f
Slide 7: Theme 1: Debt bazookas are not improving structural trend growth
Theme 1: Debt bazookas are not improving structural trend growth Evolution of general government debt, in % Higher debt levels in advanced economies are 140 not associated with stronger growth WWI WWII Global COVID- Financial 19 crisis 120 Crisis 160 Advanced 140 100 economies 120 Govt debt % GDP 80
Slide 8: Theme 2: Global economic resilience is weaker, pointing to lower growth
Theme 2: Global economic resilience is weaker, pointing to 1.6%pts lower growth over five years Higher economic resilience is associated with Global resilience set to drop by ~20% due to COVID-19 better growth outcomes in advanced economies 1.0 Best Mon. pol. space 0 0.8 Subsequent 5y growth deviati
Slide 9: Theme 3: Low interest rates will stay low with financial repression
Theme 3: Low interest rates will stay low with financial repression contributing to the >USD16trn negative yielding govt’ bonds Majority of the Euro area and Japanese sovereign bonds are trading at negative yields Equivalent to a 90% 3.5% p.a “tax” Euro area Japan Globally 80% in the US on household
Slide 10: Call for action: we need to “Build Back Better”
Call for action: we need to “Build Back Better” focusing on macro resilience to improve long-term growth and societal outcomes Targeted investments into: Strengthen policy frameworks to: Sustainable infrastructure Limit rises in inequality Increase fiscal transparency & Digital economy & human capit
Slide 11: Global insurance outlook
Global insurance outlook “COVID-19 is causing the worst recession of our lifetimes. Yet in the face of adversity, insurance markets are holding up well as premiums see a V-shaped recovery” Dr. Jérôme Haegeli, Group Chief Economist of Swiss Re 11
Slide 12: We forecast a strong V-shaped premium outlook
We forecast a strong V-shaped premium outlook Insurance premium real growth compared Insurance premium forecasts with GFC COVID 19 2019 2020e 2021F 2022F World (non-life) 3.5 1.3 3.5 3.6 8% Advance market 2.7 0.9 2.8 2.7 6% Emerging market 7.6 3.3 7.3 8.0 4% World (life) 2.2 -4.5 3.2 2.8 Advanced ma
Slide 13: Non-life insurers needs to offset low interest rates impacts
Non-life insurers needs to offset low interest rates impacts Long-term relationship between interest Non-life profitability gap and interest rate sensitivity rates and combined ratio 120 16 USA Canada UK Germany France Italy Japan 0% 14 115 12 -2% 110 -6% -6% 10 -7% -4% -8% -9% -9% -9% 105 8 -6% 6 -
Slide 14: Keep macro scenarios in mind and make contingency plans
Keep macro scenarios in mind and make contingency plans Change in premium growth vs baseline (percentage points) Optimistic scenario Severe & protracted recession Stagflation 15% 5% 10% • Stronger premium growth and investment • A double-blow to premium and investment • Weaker premium recovery in 20
Slide 15: Emerging markets, greening the economy & digitalisation are the biggest opportunities
Emerging markets, greening the economy & digitalisation are the biggest opportunities while the interest rate environment is the biggest challenge Challenges Opportunities Low to negative interest Digitalisation rates giving rise to balance sheet stress Expansion of emerging markets continues Slump
Slide 16: Key takeaways
Key takeaways Macro Recovery remains fragile •Monitoring scenarios are key with evolving paradigm shifts •Stagflation risk and financial repression environment in the spotlight Public policies Policy re-set needed •“More of the same” public policies won’t improve the economic environment •Policies n
Slide 17: Latest Swiss Re Institute publications
Latest Swiss Re Institute publications Dr. Jérôme Haegeli | November 2020 17
Slide 18: Any questions?
Any questions? Dr. Jérôme Haegeli | November 2020 18
Slide 19: Appendix
Appendix Dr. Jérôme Haegeli | November 2020 19
Slide 20: Scenarios matter amid elevated uncertainty
Scenarios matter amid elevated uncertainty Narrative Key assumptions Signposts '20 '21 '22 V-shaped • Structural reform drive and increase Real GDP US (%) -3.6 6.8 3.8 recovery cooperation growth EZ (%) -6.8 8.0 4.5 • Quick labour market recovery 15% • Growth boost from green investments CN (%) 3.7
Slide 21: Global insurance premium outlook by region
Global insurance premium outlook by region World Advanced markets Emerging markets North America EMEA Asia-Pacific 2020 2021-22 2020 2021-22 2020 2021-22 2020 2021-22 2020 2021-22 Non-life, direct Premium growth (real) CAGR l l l l l l l l l l Profitability ROE Average l l l l l l l l Underwriting r
Slide 22: Commercial lines: stronger pricing to continue
Commercial lines: stronger pricing to continue Note: up green arrow: accelerating rate increase, flat green arrow: stable rate increase in high level Source: Marsh, Global insurance rate index, Swiss Re Institute Dr. Jérôme Haegeli | November 2020 22
Slide 23: Overall premium impacts will be more negative for Life than health and P&C (2020)
Overall premium impacts will be more negative for Life than health and P&C (2020) Property & Casualty Premiums Claims In-force New Claims & Life & Health business business benefits Personal Personal auto lines Protection Mortality Personal property business Commercial Commercial auto Disability insu
Slide 24: 2021 Outlook: most P&C lines and L&H premiums will achieve trend growth
2021 Outlook: most P&C lines and L&H premiums will achieve trend growth Property & Casualty Premiums Claims New Claims & Life & Health business benefits Personal Personal auto lines Protection Mortality Personal property business Commercial Commercial auto Disability insurance Commercial property Cr
Slide 25: Dr. Jérôme Haegeli | November 2020
Dr. Jérôme Haegeli | November 2020 25
Slide 26: Legal notice
Legal notice ©2020 Swiss Re. All rights reserved. You may use this presentation for private or internal purposes but note that any copyright or other proprietary notices must not be removed. You are not permitted to create any modifications or derivative works of this presentation, or to use it for