creating the future - swiss re group | swiss reee621221-9e84-4783-834d-367c0e… · 09/09/2013 ·...

Creating the future Investors and Media meeting

Monte Carlo, 9 September 2013

Investors and Media meeting | Monte Carlo | 9 September 2013

Introduction

Current market environment

Differentiation through knowledge

Outlook

Questions & answers

Michel M. Liès, Group CEO

2

Today's agenda

Christian Mumenthaler, CEO Reinsurance and Matthias Weber, Group CUO

Michel M. Liès, Group CEO


Introduction Michel M. Liès, Group CEO

3

Investors and Media meeting | Monte Carlo | 9 September 2013 4

Our first treaty ("Helvetia Allgemeine"), 1863 Our first office, 1864


A short journey through our history

Some of our first underwriters (Fire), 1890


Our generations theme Focus on four strategically important topics

Advancing sustainable energy solutions

Funding longer lives

Managing climate and natural disaster risk

Partnering for food security


L&H Reinsurance: ROEs expected to improve to 10-12% by 2015

Admin Re®: continue to evaluate deals based on Group profitability requirements; strengthen operational efficiency; third-party capital

Priorities for the Group CEO Perform and grow

P&C Reinsurance: successful renewals at attractive rate levels expected to continue, expect net premium growth from expiry of QS

Corporate Solutions: on track to achieve profitable growth targets

Outperform our peers in P&C

Strategy unchanged, focus on execution, keeping the pressure on

Continued emphasis on high growth markets for all business lines

Productivity emphasis to control mgmt. expenses at lower levels

Group strategy

Address low returns in L&H

Capital and asset management

Continue active capital management in line with dividend policy, USD >4bn deleveraging planned by 2016, improving EPS and ROE

Asset re-balancing towards mid-term plan for credit and equity accelerated in 2013, utilising approx. USD 3bn of economic capital

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Current market environment

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Advert for our US branch, 1934


Low interest rates

Continuous reserve releases

Industry capitalisation

10

Factors leading to lower prices

Factors leading to higher prices

? Low inflation

Regulatory changes

?

Three year pricing outlook from Monte Carlo 2012

High

Drivers of re-/ insurance prices

Nat Cats

Low

Prices


Pricing driver Impact Comments

Low interest rates Despite recent increases, rates are still near historic lows

Regulatory changes Delay in Solvency II implementation, but no change in global pace of regulatory change

Natural catastrophes No globally significant nat cats have occurred to date in 2013

Reserve releases Reserve releases continue to decline

Low inflation Low inflation is expected to continue in the immediate future

Industry capitalisation Alternative capital is entering the industry, particularly for nat cat risks

What happened since? Impact of drivers on reinsurance industry pricing

Nat cat pricing is expected to decrease before stabilising in 2014, other lines of business are expected to remain stable


Products Investor Type Growth

ILS

Asset Managers Dedicated ILS Funds Hedge Funds Pension Funds

ILW Dedicated ILS Funds Reinsurers

Collateralised Reinsurance

Dedicated ILS Funds Hedge Funds

Sidecar

Asset Managers Hedge Funds Pension Funds Private Equity

Cyclical

12

Product split

Alternative capital is entering the Nat Cat re/insurance market

40%

8%

47%

5%

ILS ILW Collateralised Sidecar

Nat Cat offers attractive investment opportunities in a low yield environment

Alternative capacity is expanding, particularly with the increase of long term pension fund money and is competing with reinsurance by offering collateralised capacity to the insurance market

Source: Swiss Re Capital Markets


Alternative capital focuses on peak cat perils

Alternative capital is expected to stay, but has yet to be tested in case of rising interest rates or large catastrophe losses

Alternative capital plays a significant role in markets with low entry barriers and high margins

Alternative capital is collateralised; collateral is tied up post-event for potential adverse reserve developments

Distribution by peril and segment


70%

25%

5%

US cat

Europe cat

Other

33%

67%

Backing reinsurers

Backing insurers


Alternative capital has regained market share


Recent growth mainly driven by collateralised reinsurance

Alternative capital currently absorbs approx. 22% of the US Cat reinsurance market, reaching the peak of 2007

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011 2012 2013e

14

0

5

10

15

20

25

30

35

40

45

2005 2006 2007 2008 2009 2010 2011 2012 2013e

USDbn

Sidecar ILW Collateralised ILS

Estimated size of global market Share of US market


Cat bond secondary market spreads

0

3

6

9

12

2009 2010 2011 2012 20130

3

6

9

12 Historically, capital market prices have been volatile, driven by changing supply and demand dynamics

Cat bond spreads have tightened approx. 30% YoY

Capital market prices have stabilized since April 2013

Example: US exposed cat bonds with an expected loss between 1.25% and 2.5%

Cat bond trading implies a new price baseline has been reached

in% in%

15

Any rise in interest rates or further spread tightening is likely to reduce the attractiveness of Nat Cat to alternative capital investors



Increase in largest industry loss scenarios per region…

2012 vs. 2020 EQ: Earthquake (500 yrs) TC/WS: Tropical Cyclones/Winter Storms (100 yrs); TC includes storm surge FL: River Flood (250 yrs)

… is driven by

Growth in exposed economic values

Growing middle class in High Growth Markets (HGM) leading to higher insurance penetration

Governments moving Nat Cat risks into the private sector

Possible increase in demand through major Nat Cat events or new regulation

USD bn

Demand for nat cat insurance expected to increase on average by approx. 50% in mature markets and 100% in HGM by 2020

Demand for Nat Cat capacity will continue to increase

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Property:

Renewal 2013 – 2014 Line of business trends

Special Lines:

Drivers of change

Increase of alternative capacity Stable ILS spreads since April Regulatory changes (Solvency II) Exposure expected to grow faster

than GDP

Industry outlook

Nat Cat rates are experiencing decreases, but are expected to stabilise in 2014

Demand for Nat Cat capacity will continue to increase

Wealth, economic power and insurable risk will shift towards High Growth Markets

Slowly improving economic outlook, also in mature markets

Accelerating exposure growth Price development expected to be flat

overall, differences by market and line of business exist

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Liability:

Renewal 2013 – 2014 Line of business trends

Motor:

Drivers of change

Interest rate environment Reserves in recent underwriting

years are showing signs of strain Regulatory changes (Solvency II)

Industry outlook

Hardening US insurance market, other segments lack clear direction

Broad rate increases likely in case of deteriorating reserve adequacy

Slowly improving economic outlook, also in mature markets

Coverage broadening in some markets (e.g. periodic payment orders)

Regulatory changes (e.g. Solvency II, China)

Exposures growing with changes to structures

Price development expected to be flat overall, differences by market exist

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Differentiation through knowledge

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Postcard from a Swiss Re client manager on his way to Brazil, 1918


Swiss Re is a global operator, with over 60 offices in more than 20 countries

Swiss Re has both a superior capital rating1 and 150 years of experience in providing reinsurance solutions for our clients

A long history of paying claims is valued by clients; during 2012 we paid claims originating from a 1950 P&C contract and a 1951 L&H contract

This track record provides Swiss Re with preferential access to long tail business, such as Casualty

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Differentiated through history

Swiss Re's charter of foundation, 1863

1 S&P: AA-, stable outlook; Moody's: A1, positive outlook; AM Best A+, stable outlook. Ratings as at 6 September 2013


Swiss Re underwrites P&C business both directly with clients and via brokers (split approximately 50/50)

Our client centric focus has strengthened relationships throughout our clients.

The depth and breadth of our relationships allows targeted solutions for clients and assists with knowledge transfer and product development

Swiss Re often achieves differentiated terms and conditions

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Differentiation through access and solutions

32%

19% 11%

38%

Renewed single-year deals

New single-yeardeals

New multi-yeardeals

MarketPlacements

Tailored solutions deliver exactly what clients need and produce higher margins for Swiss Re

Expected economic profit by source Globals division, January 2013 renewals

Open market: Market Placement

Unique transactions:


Attribute Description Swiss Re Non-

diversified Reinsurers

Alternative Capital

1. Capital raising capability

Quick access to capital when needed, i.e. post-event

2. Access to business Global physical presence, direct or broker

3. Products offering Broad coverage of perils, full spectrum of products to meet client needs including complex structuring

4. Value-added offerings Capacity, underwriting manuals, common product development, knowledge sharing ✘ ✘✘

5. Risk selection Proprietary R&D and pricing tools, more and better data ✘✘

6. Portfolio optimisation Cycle management, hedging & trading, etc.

7. Operational cost Lean organisation and low cost structure ✘

Comparison of business models along the reinsurance value chain

Capitalization

Origi-

nation U

nder-w

riting

P

ortfolio M

gmt.

Large diversified reinsurers compare favourably, providing more benefits for clients


Services and expertise CatNet®

CatNet® is Swiss Re's online natural hazard information and mapping system for clients

Data is combined with Google Maps™ and satellite imagery

Facilitates assessment of natural hazard exposure for local and regional risks

Demo: www.swissre.com/catnet

CatNet® Number of hazard maps provided per month

2009 2010 2011 2012


CatNet® demonstration


Cat Net® Proved its value in Calgary flood

Flood footprint 2013: PERILS ltd.

Flood footprint Calgary 2013 Swiss Re Global Flood Zones:


Partnering on new product development, such as pollution coverage in China

TWISTER:

On line risk assessment tool for weather index business

Tailored underwriting training, from introductory courses to advanced seminars

Services and expertise Providing additional value to our clients

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PUMA:

Project Underwriting Management Application

Property

Agro

Engineering

Casualty

Claims Our claims benchmarking service analyses tens of thousands of individual

claims files; tailored reports allow clients to improve efficiency by comparing metrics such as reserve accuracy with industry averages


Outlook Michel M. Liès, Group CEO

28


Our headquarters, 2013

Creating the future


Summary

Alternative capital increases competition and capacity, but does not challenge Swiss Re's business model

Swiss Re is a knowledge company with permanent contact to and a deep understanding of our clients throughout the entire organisation

Through our differentiation of products and services, Swiss Re creates more value for clients and generates additional profitable business

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Deliver on unchanged Group strategy

Achieving our 2011-2015 financial targets remains the top priority


Our new headquarters, 2017


Questions & answers

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Corporate calendar & contacts Corporate calendar 07 November 2013 Third Quarter 2013 results Conference call 20 February 2014 Annual Results Conference call 18 March 2014 Publication of Annual Report 2013 and EVM 2013 24 March 2014 AGM Briefing Call Conference call 11 April 2014 150th Annual General Meeting Zurich

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Investor Relations contacts Hotline E-mail +41 43 285 4444 [email protected] Eric Schuh Ross Walker Chris Menth Lorenz Fichter Simone Fessler +41 43 285 4708 +41 43 285 2243 +41 43 285 3878 +41 43 285 7129 +41 43 285 7299

Media Relations contacts Hotline E-mail +41 43 285 7171 [email protected] Rolf Tanner Stefanie Weitz Michael Gawthorne Brigitte Meier Lukas Meermann +41 43 285 4904 +41 43 285 8368 +41 43 285 9707 +41 43 285 3035 +41 43 285 8668


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 any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results of operations, financial condition, solvency ratios, liquidity position or prospects to be materially different from any future results of operations, financial condition, solvency ratios, liquidity position or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets. Such factors include, among others:

further instability affecting the global financial system and developments related thereto, including as a result of concerns over, or adverse developments relating to, sovereign debt of euro area countries;

further deterioration in global economic conditions; Swiss Re’s ability to maintain sufficient liquidity and access to capital markets,

including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of Swiss Re’s financial strength or otherwise;

the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;

changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions;

uncertainties in valuing credit default swaps and other credit-related instruments; possible inability to realise amounts on sales of securities on Swiss Re’s balance

sheet equivalent to their mark-to-market values recorded for accounting purposes; the outcome of tax audits, the ability to realise tax loss carryforwards and the

ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings;

the possibility that Swiss Re’s hedging arrangements may not be effective; the lowering or loss of one of the financial strength or other ratings of one or more

Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings;

the cyclicality of the reinsurance industry; uncertainties in estimating reserves; uncertainties in estimating future claims for purposes of financial reporting,

particularly with respect to large natural catastrophes, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available;

the frequency, severity and development of insured claim events; acts of terrorism and acts of war; mortality, morbidity and longevity experience; policy renewal and lapse rates; extraordinary events affecting Swiss Re’s clients and other counterparties, such

as bankruptcies, liquidations and other credit-related events; current, pending and future legislation and regulation affecting Swiss Re or its

ceding companies, and the interpretation of legislation or regulations by regulators;

legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability;

changes in accounting standards; significant investments, acquisitions or dispositions, and any delays,

unexpected costs or other issues experienced in connection with any such transactions;

changing levels of competition; and operational factors, including the efficacy of risk management and other internal

procedures in managing the foregoing risks.

These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.

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creating the future - swiss re group | swiss reee621221-9e84-4783-834d-367c0e… · 09/09/2013 ·...

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