Swiss Re Ag · SIX:SREN
Swiss Re — FY2019 Earnings Presentation
60 slides from Swiss Re's earnings presentation, Feb 20, 2020
Slide 1: Annual Results 2019
Annual Results 2019 Swiss Re investor and analyst presentation Zurich, 20 February 2020 Annual Results 2019
Slide 2: Focus areas of Annual Results 2019
Focus areas of Annual Results 2019 Earnings in P&C pricing Life Capital Capital Leadership in context update transition actions sustainability Annual Results 2019 2
Slide 3: Swiss Re has weathered multiple cycles in its recent history
Swiss Re has weathered multiple cycles in its recent history USD m 5 000 World Trade Global Record levels of nat cat 140 Centre and end financial crisis losses and adverse US of dot-com casualty trends 4 000 bubble 105 3 000 2 000 70 1 000 35 0 -1 000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2
Slide 4: Breakdown of capital allocation and 2019 performance
Breakdown of capital allocation and 2019 performance ROE FY 2019 • Majority of capital allocated 15% to Reinsurance, meeting cost 12.4% of capital in a challenging year 10% Reinsurance ROE of 8.0% 4.4% 4.8% 5% • Further decisive management actions to 0% restore Corporate Solutions profitability -5%
Slide 5: Main elements driving the Group's 2019 results
Main elements driving the Group’s 2019 results Elevated Corporate Solutions US casualty impact Excellent investment nat cat losses turnaround on P&C Reinsurance result Multiple nat cat events and Decisive management actions Proactive measures to address Strong equity and fixed late reported losses o
Slide 6: Nat cat market remains attractive, despite another year of high losses
Nat cat market remains attractive, despite another year of high losses Heavy nat cat burden in 2019… … given overweight positions in affected regions P&C Re large nat cat claims1, USD bn Swiss Re’s indicative market share in nat cat business 4.0 Global average: 11% 3.5 3.0 2.5 2.0 1.5 14% Japan 1.0
Slide 7: Corporate Solutions results impacted by increased US casualty claims and decisive actions
Corporate Solutions results impacted by increased US casualty claims and decisive actions to address underperformance Corporate Solutions results impacted by management actions and US casualty trends Split of pruning actions 2019 Gross premiums written (USD 231m) Claims • Pronounced increase in seve
Slide 8: Proactive measures taken in P&C Reinsurance amid rising US casualty claims costs
Proactive measures taken in P&C Reinsurance to remain ahead amid rising US casualty claims costs P&C Reinsurance 2019 results reflect actions to address US casualty trends Top 50 US tort verdicts: median verdict value, USD m1 • Casualty trends have been deteriorating in the US, with growing 60 avera
Slide 9: Group investments delivered excellent results
Group investments delivered excellent results 4.7% 2.8% USD 5m Return on investments Running yield Impairments Reflecting strong global Stable running yield, Very low impairments equity market performance, moderately impacted by the continuing to reflect a high the sale of SulAmérica and low interes
Slide 10: Overview of business segment results and outlook
Overview of business segment results and outlook 2019 2020 performance outlook • Results impacted by large nat cat losses and adverse prior-year development P&C 4.4% • Underlying 2019 performance in line with 98% combined ratio estimate; efficiency gains supported by strong premium growth Reinsuranc
Slide 11: Solid outcome of January renewals for P&C Reinsurance
Solid outcome of January renewals for P&C Reinsurance Price change1 +0% - Nominal price change +5% - Impact of lower interest rates -3.5% - Impact of higher loss assumptions -1.5% P&C Reinsurance renewals Exposure change +2% • Volume up 2% YTD – driven by +2% 14% growth in nat cat business USD bn 1.
Slide 12: January Reinsurance renewals see improved pricing and volume growth in nat cat business
January Reinsurance renewals see improved pricing and volume growth in nat cat business Gross premium volume by line of business1 (USD bn) Gross premium volume by region1 (USD bn) Up for Premium Estimated Price Up for Premium Estimated renewal Jan change outcome Jan change3 renewal Jan change outcom
Slide 13: Pricing momentum for Corporate Solutions remains strong
Pricing momentum for Corporate Solutions remains strong Corporate Solutions achieved significant price increases since 2019 • 12% price increases achieved in 2019 following Price increases 3% in 2018 • Strong pricing momentum continued in January 2020 with 14% price increases 14% • Strongest increas
Slide 14: Strategic milestone achieved with agreement to sell ReAssure
Strategic milestone achieved with agreement to sell ReAssure, improving the Group’s return on capital profile ReAssure sale expected to close mid-20201 Focus on dynamically growing B2B2C businesses GBP 3.25bn GBP 1.2bn +22% transaction cash proceeds Open book GPW valuation to Swiss Re growth in 2019
Slide 15: Proposed capital management actions are attractive for shareholders
Proposed capital management actions are attractive for shareholders 5% regular dividend per share increase Swiss Re’s capital management priorities remain unchanged CHF Priority I Priority II +5% 5.00 5.60 5.90 Ensure superior capitalisation Grow the regular dividend at all times and maximise with l
Slide 16: Swiss Re reinforces sustainability leadership with ambitious steps towards net-zero emissions
Swiss Re reinforces sustainability leadership with ambitious steps towards net-zero emissions 2003 2017 2018 2018 2019 20192020 2030 2030 2050 2050 100% GHG1 Responsible Thermal coal >50% Oil and gas Committed to Committed to neutral investing policy reduction in policy update net-zero net-zero pion
Slide 17: Financial highlights
Financial highlights Annual Results 2019 17
Slide 18: Key figures
Key figures Corporate Total Total USD m, unless otherwise stated P&C Re L&H Re Solutions Life Capital Group items FY 2019 FY 2018 • Premiums earned and fee income 19 275 13 004 4 166 2 149 - 38 594 34 461 • Net income/loss 396 899 - 647 - 177 256 727 421 • Return on investments 4.3% 5.0% 3.4% 3.7% 9
Slide 19: P&C Reinsurance
P&C Reinsurance Results impacted by large losses and adverse trends in US casualty Annual Results 2019 19
Slide 20: P&C Reinsurance results impacted by large losses and adverse trends in US casualty
P&C Reinsurance results impacted by large losses and adverse trends in US casualty Net premiums earned Net operating margin1 (%) Combined ratio (%) 111.5 107.8 104.0 -0.5pts 4.3 3.8 93.5 2.9 USD 19.3bn 83.8 83.7 85.7 10.7 7.8 2013 2014 2015 2016 2017 2018 2019 in 2019 -1.4 • Net impact of 2019 large
Slide 21: P&C Reinsurance strategy in action
P&C Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net premiums earned) US GAAP operating expense ratio (%) -0.7%pts • Operating leverage supported by 20% Americas 6.9% 6.2% growth in earned premiums 20% • Efficiency gains across the value chain allow EMEA 2
Slide 22: L&H Reinsurance
L&H Reinsurance Continues to deliver strong results Annual Results 2019 22
Slide 23: L&H Reinsurance continues to deliver strong results
L&H Reinsurance continues to deliver strong results Net premiums earned Net operating margin1 (%) Running yield and ROI (%) 3.5 3.8 3.5 3.4 3.3 3.4 3.3 +0.6pts 9.4 10.0 5.0 4.1 4.3 2.7 3.4 3.6 3.7 USD 12.8bn 3.3 3.2 in 2019 2013 2014 2015 2016 2017 2018 2019 11.4 12.3 Running yield ROI USD 12.7bn in
Slide 24: L&H Reinsurance strategy in action
L&H Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net premiums earned) US GAAP operating expense ratio (%) -0.2%pts • Modest absolute reduction in expense base 6.0% 5.8% combined with slightly higher top line Americas 30% EMEA 2018 2019 43% Asia • Magnum Go
Slide 25: Corporate Solutions
Corporate Solutions Results impacted by decisive management actions Annual Results 2019 25
Slide 26: Corporate Solutions results impacted by decisive management actions
Corporate Solutions results impacted by decisive management actions Net premiums earned Net operating margin1 (%) Combined ratio (%) 133.4 127.9 117.5 -5.6%pts 101.1 1.9 95.1 93.0 93.2 USD 4.2bn 8.7 5.4 -8.1 2013 2014 2015 2016 2017 2018 2019 in 2019 -18.4 • Profitability continued to be adversely i
Slide 27: Corporate Solutions strategic transformation in action
Corporate Solutions strategic transformation in action Portfolio split by region and line of business De-commoditise the core (% of net earned premium) Corporate Solutions’ share in wholesale business (%) -3%pts • Enhance focus on selected sub-segments 17% 14% and niches where Corporate Solutions ha
Slide 28: Life Capital
Life Capital Exceptional gross cash generation and strong open book growth Annual Results 2019 28
Slide 29: Exceptional Life Capital GCG and strong open book growth
Exceptional Life Capital GCG and strong open book growth Gross cash generation Net income Open book – Gross premiums written (USD m) USD 1.1bn USD -177m 1 790 CAGR ~30% 1 567 in 2019 in 2019 1 099 1 039 868 1 066 USD 0.8bn USD 23m 709 651 577 509 in 2018 in 2018 691 388 501 200 291 2015 2016 2017 20
Slide 30: Life Capital open books continue to grow dynamically
Life Capital open books continue to grow dynamically Gross premiums written (USD m) Key metrics Gross premiums written (USD m) # of distribution partners 616 <18% +17% 452 1 115 (core business) 1 174 Cost ratio 363 405 211 >2x (core business) 29 at YE 2019 89 694 2018 2019 703 19 In-force policy cou
Slide 31: Group investments
Group investments Deliver excellent value driven by a high quality investment portfolio Annual Results 2019 31
Slide 32: Group investments deliver excellent value driven by a high quality investment portfolio
Group investments deliver excellent value driven by a high quality investment portfolio Return on investments (ROI) Investment portfolio positioning (USD bn) Net investment income (USD m, LHS) Running yield (%, RHS) 140 133.4 5 000 3.3 3.5 3.2 122.6 14.5 3.0 4.7% 120 10.2 2.9 2.9 2.9 2.8 3.0 100 4 0
Slide 33: Investment portfolio well positioned to deliver consistent returns
Investment portfolio well positioned to deliver consistent returns Higher yields concentrated in longer-maturity securities (FY 2019) 4.0% 105 • Stable running yield (FY 2019: 2.8%) despite headwinds from declining yields driven by portfolio concentration in higher- 90 income, longer-maturity securi
Slide 34: Appendix
Appendix Annual Results 2019 34
Slide 35: Business segment results FY 2019 - Income statement
Business segment results FY 2019 Income statement Corporate Total Total USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group items Consolidation FY 2019 FY 2018 Revenues Gross premiums written 36 014 21 562 14 452 4 974 2 831 - -1 591 42 228 36 406 Net premiums written 33 616 20 882 12 734 4
Slide 36: Business segment results FY 2019 - Balance sheet
Business segment results FY 2019 Balance sheet Corporate End End 31 December 2019, USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group items Consolidation FY 2019 FY 2018 Assets Fixed income securities 70 885 38 877 32 008 7 473 3 088 127 - 81 573 95 952 Equity securities 2 369 1 749 620 17
Slide 37: Total equity and ROE FY 2019
Total equity and ROE FY 2019 Corporate Total USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group items FY 2019 Shareholders' equity at 31 December 2018 15 757 9 483 6 274 1 795 5 113 5 265 27 930 Net income attributable to shareholders 1 295 396 899 - 647 - 177 256 727 Dividends and share b
Slide 38: Change in shareholders' equity mainly driven by unrealised gains and net income
Change in shareholders' equity mainly driven by unrealised gains and net income, partially offset by dividend payments and share buyback USD m Gov bonds 1.4 Corp bonds 2.3 Sec products 0.1 Other 0.2 Dividends -1.7 Tax -0.8 Share buyback -0.9 - 65 29 251 727 27 930 3 249 - 2 590 Shareholders' Net inc
Slide 39: P&C underwriting result
P&C underwriting result P&C Reinsurance and Corporate Solutions Combined ratio Main drivers of change Net premiums Underwriting earned result P&C Reinsurance FY 2019 FY 2019 FY 2018 FY 2019 USD m USD m Property 99.9% 101.3% • Both periods were impacted by large nat cat claims. The deterioration was
Slide 40: P&C Reinsurance combined ratio split
P&C Reinsurance combined ratio split Combined ratio split (%) 107.8 Key developments in 2019 104.0 110 2.0 2.0 100 10.1 • Net impact of large nat cat events in 2019 was 3.5%pts above expectations 12.1 (USD 1.9bn vs USD 1.3bn expected large nat cat impact for FY 2019) 3.5 90 6.2 6.9 • Unfavourable pr
Slide 41: Worsening US casualty trends driving reserve deterioration
Worsening US casualty trends driving reserve deterioration Negative prior-year development1 observed since 2014… • US casualty experienced positive prior-year development 2% until 2014. Since then, paid losses have accelerated, although they were offset by releases in workers’ 1% compensation until
Slide 42: Swiss Re's actions to improve profitability and manage risk in casualty Reinsurance
Swiss Re’s actions to improve profitability and manage risk in casualty Reinsurance Actions to manage the casualty book were initiated in 2017 Further progress on these actions at January renewals Specific strategies for each sub-portfolio defined based on • Rate increases on US casualty business mo
Slide 43: Corporate Solutions combined ratio split
Corporate Solutions combined ratio split Combined ratio split (%) 127.9 Key developments in 2019 130 1.4 117.5 8.4 • Prior-year development reflects management actions to reposition the 120 6.0 business and strengthen reserves. The result was also impacted by large and 110 16.1 medium-sized claims r
Slide 44: Path to Corporate Solutions 2020 combined ratio of 105%
Path to Corporate Solutions 2020 combined ratio of 105% Expected combined ratio development 128% • Higher normalised 2019 combined ratio (adj. for ADC premium and restructuring costs) vs. 2018 explained by ~13%pts higher initial loss picks and increase in small to medium- 115% sized losses ~2%pts ~1
Slide 45: On track with implementation of Corporate Solutions management actions
On track with implementation of Corporate Solutions management actions Update on Corporate Solutions 2019 management actions Pruning actions in targeted portfolios 2019 (USD 231m) Claims Pronounced increase in severity and frequency of US US general liability developments and casualty claims. H1 res
Slide 46: L&H Reinsurance EBIT movements
L&H Reinsurance EBIT movements EBIT movements (USD m) FY 2018 FY 2019 Life Health L&H Life Health L&H EBIT reported 720 355 1 3673 581 258 1 4913 Net operating margin, % 7.3 8.2 9.4 6.0 5.8 10.0 Mortality/morbidity experience vs. expected1 -109 41 -68 133 -78 55 Valuation/assumption changes2 21 -25
Slide 47: Financial impact of agreement to sell ReAssure
Financial impact of agreement to sell ReAssure US GAAP impact of agreement to sell ReAssure End • Transaction valuation of GBP 3.25bn results in USD 3.2bn fair USD bn FY 2019 value of transaction proceeds (due to 75% stake held by Swiss Re in ReAssure and year-end fx rates) 1 Fair value of transacti
Slide 48: Return on investments (ROI)
Return on investments (ROI) Corporate Total Total USD m P&C Re L&H Re Solutions Life Capital Group items Consolidation FY 2019 FY 2018 Investment related net investment income 1 310 1 113 240 787 552 -435 3 567 3 396 Fixed income 878 1 026 220 722 3 - 2 849 2 892 Equities and alternative investments
Slide 49: Overall investment portfolio
Overall investment portfolio Other investments (incl. policy Cash and cash equivalents loans) Mortgages and other 6% 6% End loans Short-term investments USD bn FY 2019 3% 4% Equities Balance sheet values 179.9 5% Unit-linked investments -40.2 With-profit business -5.2 Government bonds 42% Assets for
Slide 50: Fixed income securities
Fixed income securities Government Credit USD m bonds bonds End FY 2018 50 876 45 076 • Increase in government bonds driven by net End purchases and market value gains stemming FY 2019 56 399 45 624 from declining interest rates as well as favourable fx impact 4% 4% 1% • Credit bonds include corpora
Slide 51: Equities and alternative investments
Equities and alternative investments Equity securities Exchange-traded funds by sector Non-Cyclical Consumer Goods Financials End End 2% 2%2% 1% FY 2018 FY 2019 3% Information Technology USD m 6% 32% Cyclical Services Equity securities 2 695 2 599 General Industrials 9% Private equity 1 463 1 626 Ba
Slide 52: Investment portfolio excluding ReAssure
Investment portfolio excluding ReAssure Investment portfolio positioning (USD bn) 133.4 109.9 • ReAssure investment portfolio is largely comprised of government 14.5 13.3 bonds and credit investments 54.4 49.0 • Excluding ReAssure reduces the Group’s exposure to credit investments 52.1 35.6 • Credit
Slide 53: Sensitivities
Sensitivities (USD bn, pre-tax) Change in market values (Equities and Alternative Investments, excl. Real Estate) -25% -10% +25% Estimated impact on shareholders' equity -1.4 -0.6 +1.4 Estimated impact on economic net worth (EVM) -1.8 -0.7 +1.8 Estimated impact on income/loss before income tax expen
Slide 54: Premiums by country
Premiums by country 2019 Gross premiums written and fees assessed against policyholders by country1 (USD m) Total Total Life & Health Non-Life FY 2019 FY 2018 United States 6 019 11 838 17 857 14 867 United Kingdom 2 401 1 479 3 880 3 604 China 560 1 800 2 360 1 733 Australia 1 169 885 2 054 2 089 J
Slide 55: Swiss Re is broadly diversified
Swiss Re is broadly diversified Swiss Re Group net premiums earned1 2019: USD 38.6bn USD 18.2bn USD 12.0bn USD 8.4bn Americas EMEA Asia 47% 31% 22% of which HGMs: ~3% ~3% ~11% ≈17% HGMs incl. PI2: ~4% ~3% ~14% ≈21% 1 Includes fee income from policyholders; does not reflect the exposure to HGMs throu
Slide 56: 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 (USD bn) 20.6 22.2 25.4 28.8 31.3 30.2 33.2 33.7 34.5 38.6 11% 11% 12% 12% 13% 13% 12% 12% 14% 14% 35% 30% 27% 26% 26% 26% 27% 28% 26% 36% 11% 11% 12% 10% 10% 10% 11% 10% 13% 12% 21% 22% 24% 25%
Slide 57: Corporate calendar and contacts
Corporate calendar and contacts Corporate calendar 2020 19 March Publication of Annual Report 2019 Conference call 17 April 156th Annual General Meeting Zurich 30 April Q1 2020 Key Financial Data Conference call 19 May Management Dialogues Zurich 31 July H1 2020 Results Conference call 30 October 9M
Slide 58: Annual Results 2019
(in) Swiss Re Annual Results 2019 88
Slide 59: 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 any statement that does not directly relate to
Slide 60: Copyright 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 commercial or