Swiss Re Ag · SIX:SREN
Swiss Re — FY2018 Earnings Presentation
53 slides from Swiss Re's earnings presentation, Feb 21, 2019
Slide 1: Annual Results 2018
Annual Results 2018 Swiss Re investor and analyst presentation Zurich, 21 February 2019 Annual Results 2018
Slide 2: Focus areas of Annual Results 2018
Focus areas of Annual Results 2018 Earnings in Strong Life Capital Capital Leadership in context renewals transition actions sustainability Annual Results 2018 2
Slide 3: Group net income significantly impacted by large losses and change in US GAAP
Group net income significantly impacted by large losses and recent change in US GAAP accounting guidance on equity securities Impact2 on Swiss Re’s 2018 results: 4th highest annual market insured losses (USD bn)1 2017 150 2011 143 ~USD 1bn higher claims 2005 140 from large losses vs. expectations 20
Slide 4: Second consecutive year with significantly higher than expected large losses
Second consecutive year with significantly higher than expected large losses Group ROE 700bps above 10yr US govt. bonds Group Net Income Impact of change in US GAAP accounting guidance • After benign nat cat loss years from 2012-2016 the USD bn insurance industry 4.6 14% experienced two elevated 4.4
Slide 5: BU review: more positive outlook after a challenging year
BU review: more positive outlook after a challenging year 2019 2018 performance outlook • Underlying performance slightly below expectations P&C Return on equity 3.7% • Cost discipline supported by productivity measures Reinsurance • Positive outlook due to improving price trend • ROE in line with t
Slide 6: Addressing Corporate Solutions underperformance
Addressing Corporate Solutions underperformance Drivers of underperformance Actions taken • Difficult market environment: man- • Portfolio pruning started in 2017, made losses above expectations continued in 2018 and and price improvements not yet intensifying in 2019 sufficient after years of decli
Slide 7: Strong outcome of January renewals for P&C Reinsurance
Strong outcome of January renewals for P&C Reinsurance (USD bn) +19% Price change1 +1% 10.0 P&C Reinsurance renewals Exposure change +18% • Volume up 19% YTD – 8.4 2.5 14% driven by transactions, 5% from growth in core 1.4 7.0 0.5 business • Price quality up 1%; renewals dominated by non loss affect
Slide 8: January renewals supported by growth in Nat Cat and short-tail Casualty
January renewals for P&C Reinsurance supported by growth in Nat Cat and short-tail Casualty 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 change renewal Jan c
Slide 9: Life Capital transformation to dynamic primary B2B2C business
Life Capital transformation from closed book consolidator to dynamic primary B2B2C business in motion ReAssure developments in 2018… …complemented by open book evolution 2019 outlook Focus on # new policies ReAssure IPO preparation # iptiQ written in iptiQ elipsLife premium distribution 120k volume
Slide 10: Swiss Re proposes attractive capital management actions
Swiss Re proposes attractive capital management actions Regular dividend per share (CHF) +3% +12% 12% regular dividend per share increase 5.00 5.60 4.85 Rebasing supported by long-term economic earnings and sustainable capital generation 2017 2018 20191 Share buy-back programme (CHF bn) New share bu
Slide 11: Swiss Re maintains leadership in sustainability
Swiss Re maintains leadership in sustainability Key actions in 2018 Close to Responsible 100% • Early mover in switching to ESG benchmarks in equity and credit markets investing • USD 1.6bn of green bonds as of end FY 2018 assets considering ESG criteria Sustainable underwriting • • Implemented ther
Slide 12: Financial highlights
Financial highlights Annual Results 2018 12
Slide 13: Key figures
Key figures Corporate Total Total USD m, unless otherwise stated P&C Re L&H Re Solutions Life Capital Group items FY 2018 FY 2017 • Premiums earned and fee income 16 095 12 835 3 925 1 606 - 34 461 33 705 • Net income/loss 370 761 -405 23 -328 421 331 • Return on investments 2.4% 3.7% 2.1% 3.3% -1.5
Slide 14: P&C Reinsurance
P&C Reinsurance Impacted by several large nat cat and man-made losses Annual Results 2018 14
Slide 15: P&C Reinsurance impacted by several large nat cat and man-made losses
P&C Reinsurance impacted by several large nat cat and man-made losses Net premiums earned Net operating margin1 (%) Combined ratio (%) 111.5 104.0 +5.6pts 4.3 93.5 2.9 USD 16.1bn 83.8 83.7 80.7 85.7 8.9 7.8 2012 2013 2014 2015 2016 2017 2018 in 2018 -3.9 -6.4 • Net impact of large nat cat events in
Slide 16: P&C Reinsurance strategy in action
P&C Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net earned premium, USD bn) US GAAP operating expenses (USD m) -3.9% • Leveraging technology to achieve efficiency Americas 1 159 1 114 across Swiss Re’s value chain 22% EMEA 2017 2018 Asia 48% SOLUTIONS – s
Slide 17: L&H Reinsurance
L&H Reinsurance Continues to deliver solid results and profitable growth Annual Results 2018 17
Slide 18: L&H Reinsurance continues to deliver solid results and profitable growth
L&H Reinsurance continues to deliver solid results and profitable growth Net premiums earned Net operating margin1 (%) Running yield and ROI (%) 3.8 3.5 3.5 3.4 3.3 3.4 3.2 -3.7pts 13.1 4.7 4.1 4.3 3.4 3.6 3.7 3.2 USD 12.7bn 4.8 9.4 3.3 in 2018 2012 2013 2014 2015 2016 2017 2018 13.7 Running yield R
Slide 19: L&H Reinsurance strategy in action
L&H Reinsurance strategy in action Portfolio split by region and line of business CORE (% of net earned premium, USD bn) US GAAP operating expenses (USD m) 0.5% • Despite strong growth in the last years, 754 758 expense base remained stable Americas 26% EMEA 2017 2018 43% Asia SOLUTIONS – selected e
Slide 20: Corporate Solutions
Corporate Solutions Result impacted by large man- made and nat cat losses Annual Results 2018 20
Slide 21: Corporate Solutions result impacted by large man-made and nat cat losses
Corporate Solutions result impacted by large man-made and nat cat losses Net premiums earned Net operating margin1 (%) Combined ratio (%) 133.4 +12.4%pts 117.5 1.9 101.1 7.4 5.4 96.2 95.1 93.0 93.2 USD 3.9bn in 2018 -11.7 -18.4 2012 2013 2014 2015 2016 2017 2018 -19.2 -11.1 • Profitability continues
Slide 22: Corporate Solutions remains focused on key priorities
Corporate Solutions remains focused on key priorities Performance improvement actions Increase productivity Primary Lead • US General Liability pruning actions started 18 • A combination of process improvements, cost • Extension of own domestic and international months ago; time lag for improvements
Slide 23: Life Capital
Life Capital Exceptional GCG; open book growth in line with expectations Annual Results 2018 23
Slide 24: Exceptional Life Capital GCG; open book growth in line with expectations
Exceptional Life Capital GCG; open book growth in line with expectations Gross cash generation (USD m) Open book - Gross premiums written (USD m) 1196 998 1 567 945 818 CAGR 30% 721 1 039 521 543 868 709 2012 2013 2014 2015 2016 2017 2018 2015 2016 2017 2018 • Exceptional gross cash generation (GCG)
Slide 25: Life Capital open book businesses continue to grow
Life Capital open book businesses continue to grow 2016 2018 Weekly policies sold1 545 2 755 ~ 5x # of Expansion of access to distribution partners 5 19 ~ 4x attractive risk pools # of countries 5 7 +2 GPW2 (USD m) 247 412 + 67% Ambition to continue # of clients < 8 000 ~ 12 000 + 50% growing at an
Slide 26: Group investments
Group investments Result reflects a negative impact from a change in US GAAP accounting guidance Annual Results 2018 26
Slide 27: Investment result reflects a negative impact from accounting change
Investment result reflects a negative impact from accounting change Return on investments (ROI) Investment portfolio positioning (USD bn) Net investment income (USD m, LHS) Running yield (%, RHS) 140 128.0 122.6 120 9.8 3.2 3.2 3.3 10.2 4 000 3.5 2.8% 3.3%1 3.0 2.9 2.9 2.9 100 3.0 52.9 49.3 3 000 80
Slide 28: High quality portfolio drives the Group's sustainable investment result
High quality portfolio drives the Group’s sustainable investment result Credit bonds: USD 45.1bn Fixed income impairment trend Below investment grade credit bonds represent approximately half of peer average of 9% USD m bps 4% 3% 60 Investment grade rated Typical default rate assumption (Single A)
Slide 29: Appendix
Appendix Annual Results 2018 29
Slide 30: Business segment results FY 2018: Income statement
Business segment results FY 2018 Income statement Corporate Total Total USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group items Consolidation FY 2018 FY 2017 Revenues Gross premiums written 31 072 16 545 14 527 4 694 2 739 - -2 099 36 406 34 775 Net premiums written 28 745 16 098 12 647 4
Slide 31: Business segment results FY 2018: Balance sheet
Business segment results FY 2018 Balance sheet Corporate End End 31 December 2018, USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group Items Consolidation FY 2018 FY 2017 Assets Fixed income securities 65 126 35 968 29 158 8 157 22 637 32 - 95 952 101 786 Equity securities 2 446 1 776 670 1
Slide 32: Total equity and ROE FY 2018
Total equity and ROE FY 2018 Corporate Total USD m Reinsurance P&C Re L&H Re Solutions Life Capital Group Items FY 2018 1 Common shareholders' equity at 31 December 2017 18 226 10 755 7 471 2 385 7 088 5 675 33 374 Net income/loss attributable to common shareholders 1 131 370 761 -405 23 -328 421 Di
Slide 33: Decrease in common shareholders' equity driven by dividends, buy-back and unrealised losses
Decrease in common shareholders' equity driven by dividend payments, share buy-back and unrealised losses USD m Dividends -1.6 Share buy-back -1.3 Gov bonds -1.1 Corp bonds -2.2 421 Sec products -0.1 Other -0.2 33 374 Tax 0.8 - 2 939 - 2 842 - 84 27 930 Common shareholders' Net income Dividends and
Slide 34: P&C Reinsurance January 2019 renewals
P&C Reinsurance January 2019 renewals Movements in newly introduced price quality metric closely align with movements in the formerly reported LTPA Change in price quality vs. change in Long-Term Price Adequacy (LTPA) for January renewals • Swiss Re’s metric for price quality 2% was adjusted to enha
Slide 35: P&C underwriting performance
P&C underwriting performance P&C Reinsurance and Corporate Solutions Combined ratio Main drivers of change Net premiums Underwriting earned result P&C Reinsurance FY 2018 FY 2018 FY 2017 FY 2018 USD m USD m Property 119.9% 99.9% • Both periods impacted by large nat cat losses, partially offset by fa
Slide 36: P&C Reinsurance combined ratio split
P&C Reinsurance combined ratio split Combined ratio split (%) 111.5 0.5 110 104.0 21.9 2.0 Key developments in 2018 100 12.1 • Expected impact of large nat cat losses of USD 1.15bn 90 7.0 6.9 80 • Net impact of large nat cat events 5.0%pts above expectations. Favourable prior- 25.5 year development
Slide 37: Corporate Solutions combined ratio split
Corporate Solutions combined ratio split Combined ratio split (%) 133.4 130 120 117.5 Key developments in 2018 28.7 6.0 110 • FY impacted by large nat cat losses (hurricanes Florence and Michael) 11.8 100 4.0 7.2 5.7 • Increased severity and frequency of large man-made losses, including a satellite
Slide 38: L&H Reinsurance EBIT movements
L&H Reinsurance EBIT movements EBIT movements (USD m) FY 2017 FY 2018 Life Health L&H Life Health L&H EBIT reported 935 345 1 8153 720 355 1 3673 Net operating margin, % 9.9 8.8 13.1 7.3 8.2 9.4 Mortality/morbidity experience vs. expected1 21 -8 13 -109 41 -68 Valuation/assumption changes2 -4 14 10
Slide 39: 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 2018 FY 2017 Investment related net investment income 1 274 1 128 224 844 263 -337 3 396 3 132 Fixed income 831 1 046 211 803 1 - 2 892 2 765 Equities and alternative investments
Slide 40: Overall investment portfolio
Overall investment portfolio Other investments (incl. policy Cash and cash equivalents loans) Mortgages and other 4% 5% End loans Short-term investments 4% 4% USD bn FY 2018 Equities Balance sheet values 153.3 5% Unit-linked investments -25.9 Government bonds 41% With-profit business -4.8 Assets for
Slide 41: Fixed income securities
Fixed income securities Government Credit USD m bonds bonds End FY 2017 54 658 47 128 • Decrease in government bonds driven by foreign End exchange impacts as well as net sales and market value FY 2018 50 876 45 076 losses stemming from rising interest rates across the US and UK • Credit bonds inclu
Slide 42: Equities and alternative investments
Equities and alternative investments Equity securities Exchange-traded funds by sector Non-Cyclical Consumer Goods End End Financials 1% 1% USD m FY 2017 FY 2018 3%2% 1% 6% Information Technology Equity securities 3 326 2 695 6% Cyclical Services General Industrials Private equity 1 382 1 463 7% 48%
Slide 43: Estimated impact of change in US GAAP accounting guidance on reported earnings
Estimated impact of change in US GAAP accounting guidance on reported earnings Corporate Total P&C Re L&H Re Life Capital Group items USD m Solutions FY 2018 Market value of equities & alternative investments (AI) affected by the accounting guidance change 2 416 677 188 69 550 3 900 CURRENT RULES: N
Slide 44: Swiss Re proposes attractive capital management actions
Swiss Re proposes attractive capital management actions Proposed capital management actions Swiss Re’s capital management priorities • The Board of Directors (“Board”) will propose to the AGM 2019: remain unchanged − Cancellation of shares repurchased through the 2018 share buy-back programme • Ensu
Slide 45: Capital actions supported by strong track record and confident outlook
Capital actions supported by strong track record and confident outlook Peer-leading track record on capital repatriation Contribution to ENW is driving Group SST capital generation USD bn Total Contribution to Economic Net Worth (USD bn) 3.6 2.7-3.7 6.3 Group items 3.1 1.1 1.0 Corporate Solutions 2.
Slide 46: 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 -1.7 -0.7 +1.7 Estimated impact on economic net worth (EVM) -2.0 -0.8 +2.0 Estimated impact on income/loss before income tax expen
Slide 47: Premiums by country
Premiums by country 2018 Gross premiums written and fees assessed against policyholders by country1 (USD m) Total Total Life & Health Non-Life FY 2018 FY 2017 United States 5 943 8 924 14 867 14 751 United Kingdom 2 511 1 093 3 604 3 389 Australia 1 363 726 2 089 2 146 China 265 1 468 1 733 1 532 Ja
Slide 48: Swiss Re is broadly diversified
Swiss Re is broadly diversified Swiss Re Group net premiums earned1 2018: USD 34.5bn USD 16.1bn USD 11.0bn USD 7.3bn Americas EMEA Asia 47% 32% 21% of which HGMs: ~3% ~3% ~10% ≈16% HGMs incl. PI2: ~5% ~3% ~14% ≈22% 1 Includes fee income from policyholders; does not reflect the exposure to HGMs throu
Slide 49: 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) 23.5 20.6 22.2 25.4 28.8 31.3 30.2 33.2 33.7 34.5 9% 11% 11% 12% 12% 13% 13% 12% 12% 14% 36% 35% 30% 27% 26% 26% 26% 27% 28% 36% 11% 11% 12% 10% 10% 11% 10% 15% 13% 12% 21% 22% 24% 25% 2
Slide 50: Cautionary note on forward-looking statements
Cautionary note on 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
Slide 51: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 2019 14 March Publication of Annual Report 2018 Conference call 17 April 155th Annual General Meeting Zurich 3 May Q1 2019 Key Financial Data Conference call 23 May Management Dialogues London 31 July H1 2019 Results Conference call 31 October 9M 2019
Slide 52: Annual Results 2018
(in) Swiss Re Annual Results 2018 82
Slide 53: Legal notice
General Public Release Legal notice ©2019 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 cont