Swiss Re Ag · SIX:SREN
Swiss Re — H1 2000 Earnings Presentation
59 slides from Swiss Re's earnings presentation, Sep 13, 2000
Slide 1: Interim Results 2000 Analysts' meeting
Swiss Re Interim Results 2000 Analysts’ meeting 13 September 2000 London Swiss Re Analysts' meeting 9/2000 Z
Slide 2: Presentation of first half 2000 results
Presentation of first half 2000 results Executive summary Walter B. Kielholz Overall results John H. Fitzpatrick Life reinsurance John R. Coomber Non-life reinsurance Rudolf Kellenberger Outlook Walter B. Kielholz e-business update Walter B. Kielholz Swiss Re Analysts' meeting 9/2000 2 Z
Slide 3: Executive summary
Executive summary Walter B. Kielholz Chief Executive Officer Swiss Re Analysts' meeting 9/2000 3 Z
Slide 4: Highlights of 1H 2000 results
Highlights of 1H 2000 results • Top line growth of 5% of which 9% in life and 4% in non-life • Excellent ordinary profit due to excellent investment and life results, and improvement in non-life • Excellent investment result due to capital gains realised through intended shift from equities to fixed
Slide 5: Financial key figures
Financial key figures in CHF m Change 1H 2000 1H 1999 in % Gross premiums 11,255 10,690 5 Technical result non-life 381 311 23 Technical result life 384 299 28 Investment result 5,588 4,590 22 Ordinary result after tax 3,257 2,559 27 Earnings per share in CHF 229 179 28 Swiss Re Analysts' meeting 9/
Slide 6: Performance vs targets
Performance vs targets Line of Track record Target Key figures business 96 97 98 99 1H 2000 over cycle Combined ratio 109% 110% 114% 116% 111% 107% Non-life Premium growth (net) 8.1% 15.0% -0.6% 12.3% 2.8% 11% Return on sales 8.8% 11.6% 11.0% 12.8% 13.0% 11% Life Premium growth (net) 28.6% 50.4% 9.3
Slide 7: Overall results
Overall results John H. Fitzpatrick Chief Financial Officer Swiss Re Analysts' meeting 9/2000 7 Z
Slide 8: Investment result (+22%)
Investment result (+ 22%) in CHF m 7’245 Again exceptionally high realized gains due to intentional reduction of equity exposure 2 655 +22% 6 085 5 588 4 646 4 590 3 309 2 605 1995 1996 1997 1998 1999 1H2000 Return on investment 6.8% 7.0% 7.4% 8.5% 8.4% 11.3% Swiss Re Analysts' meeting 9/2000 8 Z
Slide 9: Investment result
Investment result In CHF m 1H Year 1H 2000 1999 1999 Current investment result 2,359 4,376 1,993 Realised gains and losses 3,797 3,314 2,780 Unrealised gains and losses -426 -221 -71 Management charges -142 -224 -112 Total 5,588 7,245 4,590 Swiss Re Analysts' meeting 9/2000 9 Z
Slide 10: Reported vs sustainable investment return
Reported vs sustainable investment return in CHF m Change 1H 2000 1H 1999 in % Investment result as reported 5,588 4,590 22 Sustainable investment return (7%) 3,344 2,797 20 Ordinary result after tax as reported 3,257 2,559 27 Ordinary result after tax at sustainable investment return 1,516 1,178 29
Slide 11: Investments - continued shift from equity to fixed income
Investments - continued shift from equity to fixed income CAGR 95-00: 20% Investments in CHF bn Balance sheet values 41.7 58.5 70.1 77.5 98.2 95.4 Market values 44.2 61.7 75.3 83.6 99.4 97.0 3 3 4 4 Balance sheet values in % 3 3 2 5 2 4 Other 5 5 25 21 2 5 5 26 Land and buildings 27 1 7 21 4 Holding
Slide 12: Investment reconciliation 31.12.1999 - 30.06.2000
Investment reconciliation 31.12.1999 - 30.06.2000 (balance sheet values) in CHF bn Currency revaluation Investments of acquisitions 2.4 0.3 -1.2 98.2 -1.0 -1.1 -1.1 Unrealised gains -1.1 95.4 Large losses Underwriters Re Financing activities Other 31.12.1999 30.06.2000 NB: investments at market valu
Slide 13: Technical result non-life reinsurance (+23%)
Technical result non-life reinsurance (+23%) in CHF m Improvements reflect: • slight rate increases in major markets • first success of Triple 20 programme 912 716 132 604 381 551 311 +23% -179 1995 1996 1997 1998 1999 1H2000 Combined ratio 108% 109% 110% 114% 116% 111% Swiss Re Analysts' meeting 9/
Slide 14: Profit and loss account - Non-life
Profit and loss account - Non-life in CHF m Change 1H 2000 1H 1999 in % Gross premiums written 8,053 7,758 4 Net premiums written 7,371 7,169 3 Change in provisions for unearned premiums -551 -88 526 Claims incurred -5,405 -5,669 -5 Commissions and other expenses -1,429 -1,401 2 Operating expenses -
Slide 15: Combined ratio non-life
Combined ratio non-life in % 114* 116 108 109 110 111 31 31 34 32 30 32 Expense ratio Claims ratio 80 85 78 77 79 79 * 112% (claims ratio of 78%) excluding loss from discontinued US medical business 1995 1996 1997 1998 1999 1H 2000 Swiss Re Analysts' meeting 9/2000 15 Z
Slide 16: Technical result life reinsurance (+28%)
Technical result life reinsurance (+28%) in CHF m 761 Improvements reflect: • increasing volume in Admin Re business • continued good performance in 462 traditional business +28% 353 365 384 299 151 178 1995 1996 1997 1998 1999 1H2000 Profit margin 9.6% 8.8% 11.6% 11.0% 12.8% 13.0% Swiss Re Analysts
Slide 17: Profit and loss account - Life
Profit and loss account - Life in CHF m Change 1H 2000 1H 1999 in % Gross premiums written 3,202 2,932 9 Net premiums written 2,965 2,619 13 Claims and benefits -2,352 -2,035 16 Commissions and other expenses -756 -659 15 Operating expenses -184 -181 2 Underwriting result -327 -256 28 Allocated inve
Slide 18: Expense ratios
Expense ratios in CHF m 1H 2000 1H 1999 Variance Life Operating expenses 184 181 3 Net premiums 2,965 2,619 346 Ratio 6.2% 6.9% - 0.7 Non-life Operating expenses 888 871 17 Net premiums 7,371 7,169 202 Ratio 12.0% 12.1% - 0.1 Total life & non-life Operating expenses 1,072 1,052 20 Net premiums 10,33
Slide 19: Administrative expenses
Administrative expenses in CHF m 1H 2000 1H 1999 Variance Administrative expenses 1,072 1,052 up 20 Less currency impact -11 Less acquisitions -48 Less e-business costs -23 Decrease in administrative expenses in 1H 2000 down -62 Swiss Re Analysts' meeting 9/2000 19 Z
Slide 20: Ratios
Ratios in % 1H 2000 1999 1H 1999 Asset leverage 462 415 408 Combined ratio, non-life 111 116 112 Technical provision ratio, non-life 353 342 306 Investment return 11.3 8.4 11.5 Trailing 12 months ROE 14.6 12.1 15.2 Swiss Re Analysts' meeting 9/2000 20 Z
Slide 21: Swiss Re's ROE track record
Swiss Re’s ROE track record 15% 14.6% 13.8% 14.0% 13.6% 12.7% 12.1% 10% 800 bps 970 bps 1040 bps 1060 bps 910 bps 1110 bps Return on equity 4.7% 5% 4.1% 3.6% 3.5% 3.0% 3.0% Annual average Swiss 10-year 0% govt bond yield 1995 1996 1997 1998 1999 last 12 months * * 01.07.1999 - 30.06.2000 Swiss Re An
Slide 22: Life reinsurance
Life reinsurance John Coomber CEO Division Swiss Re Life & Health Swiss Re Analysts' meeting 9/2000 Z
Slide 23: Swiss Re Life & Health: 2000 half year headlines
Swiss Re Life & Health: 2000 half year headlines Life 28% growth in technical result; 9% growth in gross premiums reflecting business growth in recent years 850 New capital invested Admin Re Growth above expectations: (USD m) capital invested USD 850 m 420 for signed transactions to end 207 August 8
Slide 24: Life premiums (+9%)
Life premiums (+ 9%) Gross premiums in CHF m 6496 + 9% 3557 3836 2932 3202 2228 1996 1997 1998 1999 1 H 2000 Acquisitions M&G Life Re included in year Swiss Re Analysts' meeting 9/2000 24 Z
Slide 25: Life result (+28%) at maintained margins
Life result (+ 28%) at maintained margins Technical result in CHF m 761 CAGR 94-99 32% + 28% 353 365 384 299 178 1996 1997 1998 1999 1H2000 M&G Life Re Result as % of net premiums 8.8% 11.6% 11.0% 12.8% 13.0% (full year except 1H 2000) Swiss Re Analysts' meeting 9/2000 25 Z
Slide 26: Life & Health: Prospects
Life & Health: Prospects Growth • Opportunities in traditional reinsurance and from Admin Re and other Financial Solutions Costs • Downward trend in cost ratio continues for traditional business • Redesign of systems/processes around e-business gives scope for further efficiencies Margins • Long-ter
Slide 27: Life & Health reinsurance has grown as cession rates have increased
Swiss Re Life & Health reinsurance has grown as cession rates have increased, particularly in the large “Anglo-Saxon” markets Estimate of global life & health Global risk premiums, by region risk premiums ceded USDbn % 20 11 25% 18 16 10 Europe, Asia, 55% Latin America 14 9 12 10 8 8 75% 6 7 Higher
Slide 28: Rationale for Swiss Re Life & Health strategy
Rationale for Swiss Re Life & Health strategy Growth CAGR Prospects Swiss Re opportunity 100% = USD 1,325bn 1995 – 1999 Risk premiums 15% • Capture natural market 20 reinsured growth Risk premiums 6% • Encourage insurers to retained in primary 195 outsource risk L&H market • Seize Admin Re, FinSol p
Slide 29: Expense ratios in Swiss Re's life business - 1H 2000
Expense ratios in Swiss Re’s life business - 1H 2000 Highest cost: Asia 12% Global 6.2% Divisional Target: 5% Significant variation Lowest cost: N. America 3% across mature / ex. Admin Re emerging markets Swiss Re Analysts' meeting 9/2000 29 Z
Slide 30: Swiss Re Life & Health productivity gains
Swiss Re Life & Health productivity gains Headcount Premiums per full-time equivalent, CHF m 1800 6 1500 5 1200 4 900 3 600 2 300 1 0 0 1996 1997 1998 1999 2000 Swiss Re Analysts' meeting 9/2000 30 Z
Slide 31: Non-life reinsurance
Non-life reinsurance Rudolf Kellenberger Head of Non-Life Swiss Re Analysts' meeting 9/2000 31 Z
Slide 32: Non-life premiums (+4%) at improved combined ratio
Non-life premiums (+ 4%) at improved combined ratio Gross premiums written in CHF bn 15.9 13.9 14.2 12.0 8.1 + 4% * 7.8 8.1 1996 1997 1998 1999 1H 2000 Combined ratio 109% 110% 114% 116% 111% * in original currencies 1.5% Swiss Re Analysts' meeting 9/2000 32 Z
Slide 33: Non-Life: 2000 half year headlines
Non-Life: 2000 half year headlines • No major natural catastrophe; man made large loss frequency at expected level • First significant improvements in reinsurance rates for natural catastrophe business • Reinsurers to benefit from increased primary insurance premium levels • Positive impact of Tripl
Slide 34: June 2000 renewals - Americas
June 2000 renewals - Americas • Generally better reinsurance terms; rate increases up to 20% (most significant in property catastrophe business) • Out of Triple 20 treaties 50% were renewed at better terms and more than one third were cancelled • More submissions due to reduced activity from oversea
Slide 35: June 2000 Renewal - Australia
June 2000 Renewal - Australia • Better reinsurance pricing evidenced following exit of two local reinsurers and market concerns on security • Facultative pricing strengthening • Out of Triple 20 treaties approximately 40% were renewed at better terms and more than one third were cancelled or are pen
Slide 36: Catastrophe market
Catastrophe market* Evolution of market pricing and risk pricing 10% 8% 6% 4% market pricing (ROL) 2% risk pricing (ROL) 0% 1994 1995 1996 1997 1998 1999 2000 * Source Swiss Re: Catastrophe market research (CAMARES) Swiss Re Analysts' meeting 9/2000 36 Z
Slide 37: Catastrophe market research (CAMARES)
Catastrophe market research (CAMARES, covers about 75% of the market) • Price decay has stopped and slightly reversed, albeit at widely unsatisfactory levels • Growing demand for high excess non-proportional cat covers • Increasing demand for larger limits Swiss Re Analysts' meeting 9/2000 37 Z
Slide 38: Outlook
Outlook Walter B. Kielholz Chief Executive Officer Swiss Re Analysts' meeting 9/2000 38 Z
Slide 39: Outlook - focus on non-life renewal 2001
Outlook - focus on non-life renewal 2001 • Consensus amongst reinsurers of insufficient pricing level in insurance/reinsurance industry - “the only way is up” (Monte Carlo) • De-leverage of non-life market through evidence of further reduction of retro capacity (squeezing mid-sized reinsurers) • Swi
Slide 40: Soft market - its effect on non-life growth
Soft market - its effect on non-life growth A top down view Index 1990 = 100, based on real growth rates • in the long term non-life 140 premiums will grow at a rate slightly above GDP growth 130 16% • as from 95 onwards pricing 120 competition kicked in and overcompensated for underlying 110 growth
Slide 41: Soft market - its effect on rate level indices
Soft market - its effect on rate level indices A bottom-up view Index 1994 = 100 • over last ten years rate indices 120 have gone a full cycle 100 • they collectively dropped by an average of around 40% from the 80 top 60 • to an approximate “right line” there is evidence again of a 40 pricing gap 2
Slide 42: Unwinding of soft market - A scenario
Unwinding of soft market - A scenario • “Fairy Tale” of overcapitalisation crumbles when solvency ratios are compared with the right level of premiums • Loss reserve levels as a percentage of premiums look much worse if compared to well priced premiums and indicate insufficiency • Hard market will s
Slide 43: What does it mean for Swiss Re?
What does it mean for Swiss Re? Observations Headcount Premiums per FTE, CHF m • Strong balance sheet maintained, increase 5000 10 of loss reserve ratio reflect pricing gap 4500 9 • Competitive position in US improved (Underwriters Re) 4000 8 • Portfolio shaped (Italy, Mexico, Columbia) 3500 7 3000
Slide 44: Swiss Re closed the gap in the US
Swiss Re closed the gap in the US Gross premiums in USD m 5000 4000 3000 2000 Underwriters Re pro forma 1000 Life 0 P/C, Accident, Health, 1995 1996 1997 1998 1999 1H2000 US peers non-life 1999 Disability, ART American Re General Re Employers Re Swiss Re Analysts' meeting 9/2000 44 Z
Slide 45: Outlook Swiss Re full year result 2000
Outlook Swiss Re full year result 2000 • Non-life reinsurance – Non-life result will improve significantly compared to 1999 despite difficult trading conditions (assuming no unusual claims events) • Life reinsurance – Growth throughout 2000 due to strong organic growth and further Admin Re transacti
Slide 46: Presentation of first half 2000 results
Presentation of first half 2000 results Executive summary Walter B. Kielholz Overall results John H. Fitzpatrick Life reinsurance John R. Coomber Non-life reinsurance Rudolf Kellenberger Outlook Walter B. Kielholz e-business update Walter B. Kielholz Swiss Re Analysts' meeting 9/2000 46 Z
Slide 47: e-business
e-business Walter B. Kielholz Chief Executive Officer Swiss Re Analysts' meeting 9/2000 47 Z
Slide 48: Implementation of Swiss Re's e-business strategy on track
Implementation of Swiss Re’s e-business strategy on track Within the last four months, market-focused initiatives increased from 15 to 25 “Redefining the Game” – Number of solutions accessible by clients e-attack doubled from 5 to 10 “Leading the Game” • New opportuni- e-new business ties in the ris
Slide 49: Solutions within e-extend address various e-business opportunities
Solutions within e-extend address various e-business opportunities •Efficient on-line risk placing / transaction capability for standardized reinsurance products • Weather derivatives, Liability quoting added to ELRiX platform •Tailored renewal of global reinsurance portfolios with three selected cl
Slide 50: Vision of Swiss Re portal
Vision of Swiss Re portal “The portal is the reception desk of our e-business world” Information Clients, Public Investors, Web-pages Value-added Others PORTAL services Transactions (ELRiX, ELRAC) User ID, High Password security Web-enabled, personalized, customizable workspace for our clients Swiss
Slide 51: 30 September version is just the beginning
30 September version is just the beginning Public web pages Swiss Re Portal 30.9. Depth of information SR SRA L&H portal portal end 2000 2001 Broadness of user base 30.9. Planned launch date Swiss Re Analysts' meeting 9/2000 51 Z
Slide 52: 30 September portal (excerpts)
30 September portal (excerpts) Choose preferences from ELRiX News 40 specific news topics Register Log in SIGMA Chartroom Chartroom offers CatNet interactive charts and tables to download Register Log in Download data CatNet offers ⇐ Þ comprehensive information Go to chart room of worldwide natural
Slide 53: Benefits of portal
Benefits of portal For clients For Swiss Re • Get richer content than today • Knows who is accessing the information • Get relevant/targeted content • Can deliver information to targeted audiences in a cost-efficient and fast • “one access” to all e-business way applications (one password) 1 • Can u
Slide 54: Outlook e-business
Outlook e-business • More than 20 e-solutions expected by year end 2000, helping to position Swiss Re as leading e-business company – innovative solutions integrating clients, products and processes on a broad scale – clients benefit in terms of convenience, transparency, efficiency, speed – Swiss R
Slide 55: Reference section
Reference section Swiss Re Analysts' meeting 9/2000 55 Z
Slide 56: Balance sheet
Balance sheet in CHF m Change 30.6.2000 31.12.1999 in % Investments - at balance sheet values 95,368 98,182 -3 - at market values 97,018 99,350 -2 Technical provisions 72,665 72,106 1 Shareholders’ equity - at balance sheet values 16,926 17,778 -5 - at market values 18,206 18,677 -3 Book value per s
Slide 57: Revaluation and other unrealised gains
Revaluation and other unrealised gains in CHF m 5 018 2 821 1 968 1 891 1 461 1 408 1 280 (Change) in 439 854 913 615 773 832* 381 revaluation reserve -449 -979 (Change) in unrealised -2 837* gains -3 793 31.12.1993 1994 1996 1998 1H2000 30.06.2000 * including currency revaluation Swiss Re Analysts'
Slide 58: Equity reconciliation: 31.12.1999 - 30.06.2000
Equity reconciliation: 31.12.1999 - 30.06.2000 Slight decrease in capital base, down 5% in CHF m 17 778 -712 -196 110 -496 3 239 16 926 -2 790 -7 1999 dividend Capital reduction Exchange rate fluctuation Goodwill net amount Change in revaluation reserve 1H 00 net profit Other changes 31.12.1999 30.0
Slide 59: Return on equity
Return on equity Ordinary result after tax Shareholders’ equity adjusted by goodwill amortisation adjusted by goodwill offset in CHF m in CHF m 22 843 22 443 169 21 048 338 17 997 17 778 16 926 182 15 591 13 010 2 919 3 088 2 377 1H1999 1H2000 last 12 31.12.98 30.6.99 31.12.99 30.6.2000 months Adjus