Swiss Re Ag · SIX:SREN
Swiss Re — Investor Presentation (September 2023)
12 slides from Swiss Re's investor presentation, September 2023
Slide 1: sigma 4/2023: Raising the bar: Non-life insurance in a higher-risk, higher-return world
sigma 4/2023: Raising the bar: Non-life insurance in a higher-risk, higher-return world Gianfranco Lot, CUO Property & Casualty Reinsurance Dr. Jérôme Jean Haegeli, Group Chief Economist September 2023
Slide 2: Setting The Scene
Setting The Scene September 2023 2
Slide 3: Key figures…
Key figures… +100 = +250 bp bp September 2023 3
Slide 4: Economic outlook: Recession delayed is not a recession avoided
Economic context Cost of capital and profitability Insurance implications Economic outlook: Recession delayed is not a recession avoided with global growth expected to slow down significantly and core inflation remaining sticky Swiss Re Institute Consensus 2022 2023 2024 2023 2024 ▪ Growth outlook:
Slide 5: Goodbye financial repression! Unprecedented tightening of monetary policy
Economic context Cost of capital and profitability Insurance implications Goodbye financial repression! The unprecedented tightening of monetary policy over the past 18 months has driven a sharp increase in the cost of capital • The 2022-23 hiking cycle was the most intense tightening of monetary po
Slide 6: Insurers didn't earn their cost of capital which has risen to its highest in a decade
Economic context Cost of capital and profitability Insurance implications Insurers didn’t earn their cost of capital which has risen now to its highest in more than a decade • Insurers overall did not earn their ROE targets in the ultra-low interest rate era after the global financial crisis in 2008
Slide 7: Profitability gains from higher yields far outweigh the rise in cost of capital
Economic context Cost of capital and profitability Insurance implications Looking ahead, profitability gains from higher yields far outweigh the rise in Cost of capital (CoC) • 100bps additional investment yield is roughly equivalent to 250bps improvement in the combined ratio for the average non-li
Slide 8: Underwriting cycle (I/II): P&C hard market momentum likely to last through 2024
Economic context Cost of capital and profitability Insurance implications Underwriting cycle (I/II): P&C hard market momentum likely to last through 2024 with new capital flows a key downside risk to watch • Traditional capacity is restrained while new business can be written on profitable terms • W
Slide 9: Underwriting cycle (II/II): The hard underwriting cycle is not over
Economic context Cost of capital and profitability Insurance implications Underwriting cycle (II/II): The hard underwriting cycle is not over with insurance profitability gap narrowing but not closing yet in key markets • Higher interest rates strongly benefit new P&C business: 100bps extra yield eq
Slide 10: Insurance sector's strategic role in narrowing protection gaps
Economic context Cost of capital and profitability Insurance implications Insurance sector’s strategic role in narrowing protection gaps is being strengthened with the end of (nominal) financial repression • The insurance industry is only sustainable if it can compensate the production factors (incl
Slide 11: Key takeaways
Key takeaways The inflation surge and quickest monetary policy tightening since the 1980s have changed the landscape for insurers, elevating risks and potential returns The interest rate benefit to new business, especially long-tail, is significant, but overall improvement including legacy liabiliti
Slide 12: Get your publication today and subscribe to our research
Get your publication today and subscribe to our research Sigma Expertise Publications Economic Insights Economic Outlook • Market information for • Expert analysis of specific • Key findings on macro • Monthly newsletters on global managers and specialist in risk topics in regional developments and