Swiss Re Ag · SIX:SREN
Swiss Re — FY2014 Earnings Presentation
48 slides from Swiss Re's earnings presentation, Feb 19, 2015
Slide 1: Annual results 2014
Draft Draft18 21 Annual results 2014 Analyst and investor presentation Zurich, 19 February 2015
Slide 2: Today's agenda
Today’s agenda • Key achievements Michel M. Liès, Group CEO • Financial performance David Cole, Group CFO • Business and strategy outlook Michel M. Liès, Group CEO Annual results 2014 2
Slide 3: Key achievements
Key achievements Michel M. Liès, Group CEO Annual results 2014 3
Slide 4: 2014 priorities and achievements
2014 priorities and achievements • Underwriting discipline maintained • Increased differentiation through products and services Group strategy • Productivity measures delivering results ahead of schedule • Continued expansion into High Growth Markets • P&C Re: underwriting results remain strong; reb
Slide 5: Continued strong and stable underwriting track record in P&C underwriting
Continued strong and stable underwriting track record in P&C underwriting 130% 5% 120% 4% 110% 114.1 101.1 98.3 98.2 97.3 100% 104.0 93.9 104.7 95.4 3% 92.8 91.2 98.4 98.4 97.9 90% 93.7 97.4 96.8 90.4 90.2 2% 80% 85.3 85.4 83.1 1% 70% 60% 0% 1 5-year avg US Treasury risk-free rates (RHS) Group combi
Slide 6: Decisive actions taken in L&H Re to improve future profitability
Decisive actions taken in L&H Re to improve future profitability Background Impact and rationale • In June 2013 we outlined the action we would take to resolve our problematic • Concluding these agreements pre-2004 US YRT business resulted in a pre-tax charge of pre-2004 • This business was producin
Slide 7: Steady investment performance through active asset re-balancing
Steady investment performance through active asset re-balancing 6% 6.3 5.5 5% 5.3 5.1 5.0 4.7 4.7 4% 4.4 4.0 3.6 3.7 3.5 3% 2% 1.8 1% 10-year avg US Treasury risk-free rates ROI 1 • Asset re-balancing helped mitigate the effect of the lower interest rate environment on the return on investments in r
Slide 8: Significant capital returned to shareholders
Significant capital returned to shareholders • Since implementation of new BU Dividend flows and capital measures since structure, significant capital distributed implementation of new BU structure in 2012 to shareholders • The Board of Directors will propose to USD 10.7bn2 the AGM 2015 distribution
Slide 9: On track to meet our 2011-2015 Group financial targets
On track to meet our 2011-2015 Group financial targets ROE 700 bps above risk free average EPS 10% average annual growth rate, over 5 years (2011-2015) adjusted for special dividends1 in % in USD2 13.0 13.4 13.7 11.9 10.2 10.5 9.2 9.6 7.7 9.2 6.6 8.4 8.8 7.3 8.0 8.5 8.2 8.6 7.8 3 3 2010 2011 2012 20
Slide 10: Financial performance
Financial performance David Cole, Group CFO Annual results 2014 10
Slide 11: 2014 highlights
2014 highlights • Swiss Re reports Group net income of USD 3.5bn, supported by strong underwriting performance and strong investment result; ROE 10.5% • P&C Reinsurance maintains strong earnings quality through disciplined underwriting and differentiation of services and knowledge • Swiss Re took de
Slide 12: Key figures
Key figures Corporate Admin Group Total Total Total Total USD m, unless otherwise stated P&C Re L&H Re Solutions Re® items FY 2014 FY 2013 Q4 2014 Q4 2013 • Premiums earned and fee income 15 598 11 265 3 444 955 - 31 262 28 818 7 839 7 766 • Net income/loss1 3 564 -462 319 34 45 3 500 4 444 245 1 20
Slide 13: P&C Reinsurance continues to deliver strong underwriting results
P&C Reinsurance continues to deliver strong underwriting results via diversified earnings stream Net premiums earned Combined ratio Net income1, ROE USD m, % % USD m, % +7.3% -0.1%pts +10.4% 3 564 ROE: 14 542 15 598 83.7% 3 228 26.7% 83.8% 2013 2014 2013 2014 2013 2014 • Increase in premiums earned
Slide 14: L&H Reinsurance net income reflects decisive actions taken
L&H Reinsurance net income reflects decisive actions taken to enhance future profitability Operating revenues Operating margin1 Net income2, ROE USD m % USD m, % +11.7% -3.2%pts 12 809 5.8% 420 358 11 465 2.6% -462 ROE: -7.9% 2013 2014 2013 2014 2013 2014 • 2014 premiums earned and fee • Operating m
Slide 15: Corporate Solutions delivers profitable growth across all regions
Corporate Solutions delivers profitable growth across all regions Net premiums earned Combined ratio Net income FY FY USD m % USD m +17.9% -2.1%pts +14.3% 93.0% 319 ROE: 3 444 279 12.5% 2 922 95.1% 2013 2014 2013 2014 2013 2014 • Increase in net premiums • Net impact from large nat cats in • Increas
Slide 16: Admin Re generates excellent gross cash
Admin Re® generates excellent gross cash Gross cash generation1 Return on investments Net income USD m % USD m +81.4% -0.5%pts -92.0% 5.1% 945 4.6% 423 521 237 ROE: 0.6% 2013 2014 2013 2014 2013 34 2014 • Excellent gross cash generation • 2014 ROI of 4.6% primarily • 2014 net income includes net dri
Slide 17: Group investment portfolio delivers a strong result
Group investment portfolio delivers a strong result Average invested assets1 Return on investments2 Total return2 USD bn, basis for ROI calculation % % -0.1% +0.1%pts +8.3%pts 8.2% 115.5 115.4 3.7% 3.6% -0.1% 2013 2014 2013 2014 2013 2014 • Average invested assets broadly • ROI of 3.7% for 2014 driv
Slide 18: Investment portfolio in line with our business mix and economic outlook
Investment portfolio in line with our business mix and economic outlook • Decrease in listed equities and alternative 100% 1% 1% 0-5% 11% 8% 5-10% investments during 2014 90% 80% − Net sales of listed equities, realising 35% 25-40% 70% 33% profits while reducing exposure 60% • Increase in credit all
Slide 19: On track to implement target capital structure
On track to implement target capital structure, reducing cost of capital and optimising financial flexibility • Achieved USD 4.8bn of deleveraging as of Core capital1 Senior debt2 Total hybrid incl. contingent capital LOC3 31 December 2014, ahead of our 2016 Senior leverage plus LOC ratio4 Subordina
Slide 20: Increase in common shareholders' equity due to net income and unrealised gains
Increase in common shareholders' equity due to net income and change in unrealised gains, partially offset by dividends and fx Gov bonds 3.6 Corp bonds 1.5 USD m Sec products 0.0 Equities and others 0.0 Tax -1.3 Total 3.8 34 828 3 500 - 3 129 3 799 - 1 192 31 850 Common shareholders' Net income Divi
Slide 21: Business and strategy outlook
Business and strategy outlook Michel M. Liès, Group CEO Annual results 2014 21
Slide 22: Priorities for the Group in 2015
Priorities for the Group in 2015 • Focus on differentiation to generate value for clients and shareholders • Maintain focus on underwriting discipline and productivity measures Group • Allocate capital to risk portfolios that meet our strategic and financial targets • Continue to shift capital and t
Slide 23: High quality portfolio of January P&C Reinsurance renewals maintained
High quality portfolio of January P&C Reinsurance renewals maintained despite rate pressure Outlook Premium volume • While Property cat rates further softened for all USD 9.6bn USD 9.2bn markets, business remains attractive -4% • Differences in price development by Casualty segment observed. Opportu
Slide 24: Swiss Re is well positioned to meet industry demand in L&H Reinsurance
Swiss Re is well positioned to meet industry demand in L&H Reinsurance Outlook Premiums and fees USD bn Demand for life and health products is expected to grow due to demographic and regulatory changes: 4 year 4 CAGR: 8.8%8% year CAGR: • Life: A large and growing global protection gap 11.2 • Health:
Slide 25: Corporate Solutions strategy implementation on track
Corporate Solutions strategy implementation on track Outlook Gross premium written2 USD bn Focus for 2015 and beyond • Move more significantly into High Growth 4 year CAGR: 13% Markets 4-5 • Expand into Primary Lead 0.2 0.1 • Continue strengthening of footprint 0.1 • 2015 combined ratio estimated1 a
Slide 26: Admin Re increases gross cash generation forecast
Admin Re® increases gross cash generation forecast Outlook Gross cash generation USD bn Strategy ≈ USD 0.5bn GCG1 expected over • Key pillars of selective growth, value extraction 2015-2016E and operational excellence USD 0.2bn from sale of US business ~0.5 • Pursue growth opportunities to build the
Slide 27: Principal Investments maintains focus on High Growth Markets and insurance
Principal Investments maintains focus on High Growth Markets and insurance Outlook Total investments End FY 2014: USD 2.7bn Generate long-term economic value via by region by sector investments in insurance-related businesses by leveraging our core competencies: EMEA 17% 21% • The provision of capit
Slide 28: Building blocks of our new 2016 financial targets
Building blocks of our new 2016 financial targets • Swiss Re is well positioned to face the challenges and opportunities of the sector − Deep underwriting knowledge and more than 150 years of experience − Geographic and product diversification to deliver attractive profitability levels − Financial s
Slide 29: New Group targets focusing on profitability and economic growth
Looking at 2016 and beyond, our new Group targets are focusing on profitability and economic growth Two Group financial targets to be introduced in 2016 Return on Equity ENW Per Share Growth (Year end ENW + dividends from current year 700bps above risk free (10-year US Gov Bonds1) divided by previou
Slide 30: Appendix
Appendix • Business segment results Q4 2014 – Income statement • Sensitivities • Business segment results 2014 – Income statement • Proposed capital motions for AGM 2015 • Business segment results 2014 – Balance sheet • Premiums by country • Total equity and ROE 2014 • Swiss Re is broadly diversifie
Slide 31: Business segment results Q4 2014
Business segment results Q4 2014 Income statement Re- Corporate Admin Group Consoli- Total Total USD m insurance P&C Re L&H Re Solutions Re® items dation Q4 2014 Q4 2013 Revenues Premiums earned 6 733 3 920 2 813 870 109 - - 7 712 7 627 Fee income from policyholders 12 - 12 - 115 - - 127 139 Net inv
Slide 32: Business segment results 2014
Business segment results 2014 Income statement Re- Corporate Admin Group Consoli- Total Total USD m insurance P&C Re L&H Re Solutions Re® items dation FY 2014 FY 2013 Revenues Premiums earned 26 810 15 598 11 212 3 444 502 - - 30 756 28 276 Fee income from policyholders 53 - 53 - 453 - - 506 542 Net
Slide 33: Business segment results 2014 - Balance sheet
Business segment results 2014 Balance sheet Re- Corporate Admin Group Consoli- End End 31 December 2014, USD m insurance P&C Re L&H Re Solutions Re® items dation FY 2014 FY 2013 Assets Fixed income securities 60 926 31 853 29 073 5 148 20 566 29 - 86 669 79 296 Equity securities 2 462 1 497 965 732
Slide 34: Total equity and ROE 2014
Total equity and ROE 2014 Re- Corporate Admin Group Total1 Total1 USD m insurance P&C Re L&H Re Solutions Re® items FY 2014 Q4 2014 Common shareholders' equity2 at 30 September 2014 19 234 12 503 6 731 2 674 6 089 5 630 33 623 Common shareholders' equity2 at 31 December 2013 18 384 12 840 5 544 2 77
Slide 35: P&C Reinsurance Underwriting performance
P&C Reinsurance Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net Under- FY FY premiums writing Q4 2013 2014 Main drivers of change earned result 2014 Property 72.3% 69.7% • 2014 profited from better nat cat experience, 6 783 2 052 76.3% partly offset by le
Slide 36: P&C Reinsurance: 2015 renewals
P&C Reinsurance: 2015 renewals Portfolio weighting by line of business and region Gross premium volume, treaty portfolio Up for renewal January Estimated outcome January By line of business 14% 16% Casualty 46% 45% Nat Cat 20% 21% Property 1 20% 18% Specialty 1 By region 30% 30% EMEA 47% 50% America
Slide 37: Corporate Solutions Underwriting performance
Corporate Solutions Underwriting performance Combined ratios in %, premiums and underwriting result in USD m Net Under- FY FY premiums writing Q4 2013 2014 Main drivers of change earned result 2014 Property 89.3% 81.1% • 2014 driven by favourable natural catastrophe 1 347 254 75.2% experience Casual
Slide 38: Return on investments (ROI)
Return on investments (ROI) Corporate Admin Group Consoli- Total Total Total USD m P&C Re L&H Re Solutions Re® items dation FY 2014 FY 2013 Q4 2014 Investment related net investment income 999 1 244 113 901 115 14 3 386 3 178 810 Fixed income 676 1 145 107 856 4 - 2 788 2 605 691 Equities and altern
Slide 39: Overall investment portfolio
Overall investment portfolio 55% invested in cash, short-term investments or government bonds Mortgages Cash and and other cash loans Other equivalents Short-term Equities 2% 6% End 5% investments 6% USD bn FY 2014 11% Securitised Balance sheet values 151.4 products 5% Unit-linked investments -22.7
Slide 40: Fixed income securities
Fixed income securities Net purchases of government bonds, stable credit investments Government Credit • Increase in government bonds USD m bonds bonds driven by net purchases to lengthen End duration, as well as mark-to-market FY 2013 41 029 38 267 gains due to declining interest End FY 2014 48 271
Slide 41: Equities and alternative investments
Equities and alternative investments Reduction in listed equities and hedge funds Equities Listed Equities Non-Cyclical Consumer Goods End End by sector 4% 1% Information Technology USD m FY 2013 FY 2014 4% 5% Financials 22% Exchange-traded funds Listed Equities1 6 248 3 118 7% Cyclical Services Pri
Slide 42: Sensitivities
Sensitivities USD m, pre-tax Fall in market values (Equities and Alternative Investments, excl. Real Estate) -10% -25% Estimated impact on shareholders' equity - 806 -2 015 Estimated impact on economic net worth (EVM) - 958 -2 394 Change in interest rates -50bps -25bps +50bps +100bps Estimated impac
Slide 43: Proposed capital motions for AGM 2015
Proposed capital motions for AGM 2015 • Increase regular dividend to CHF 4.25 per share and pay out a special dividend of CHF 3.00 per share – Both dividends to be paid in the form of Swiss withholding tax exempt distributions out of legal reserves from capital contributions; such reserves totalling
Slide 44: Premiums by country
Premiums by country 2014 Gross premiums written and fees assessed against policyholders by country1 Total Total USD m Life&Health Non-Life FY 2014 Life&Health Non-Life FY 2013 USA 4 916 6 345 11 261 4 984 6 338 11 322 UK 2 665 1 057 3 722 2 679 991 3 670 China 104 2 619 2 723 98 2 569 2 667 Australi
Slide 45: Swiss Re is broadly diversified
Swiss Re is broadly diversified Asian contribution continues to grow Swiss Re Group net premiums earned1 2014: USD 31.3bn USD 12.2bn USD 11.3bn USD 7.8bn Americas EMEA Asia 39% 36% 25% of which HGMs: ~3% ~ 4% ~ 14% ≈21% HGMs incl. PI2: ~5% ~ 4% ~ 18% ≈27% 2015 target of 20-25% of premiums from HGMs
Slide 46: Premium development by line and geography
Premium development by line and geography Growth in Casualty and Asia Premiums earned and fee income by line of business, USD bn • Long-term trend from Life to 24.3 23.5 20.6 22.2 25.4 28.9 31.3 Health and from Property to 10% 9% 11% 11% 12% 12% 13% Casualty continues 35% 37% 34% 31% 28% 26% • Life
Slide 47: Corporate calendar & contacts
Corporate calendar & contacts Corporate calendar 2015 18 March Publication of Annual Report 2014 and EVM Results 2014 21 April 151st Annual General Meeting Zurich 30 April First Quarter 2015 Results Conference call 30 July Second Quarter 2015 Results Conference call 29 October Third Quarter 2015 Res
Slide 48: 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 an