Underwriting. Swiss Re's approach to underwriting... Matthias Weber, Group Chief Underwriting Officer Investors' Day, London, 17 April 2012

Transcription

1 Underwriting Mtthis Weber, Group Chief Underwriting Officer Investors' Dy, London, 17 April 2012 Swiss Re's pproch to underwriting... Significnt investment in R&D Unified underwriting tools, processes nd guidelines cross the Group Cycle mngement nd portfolio steering, including mnging exposures through ILS nd retro Segregtion of underwriting, sles nd reserving functions Underwriting sets objective price ensures dequcy of terms nd conditions Sles hs finl decision on sles price but performnce mesured vs objective price Reserving provides independent view on business written Investors' Dy Underwriting London, 17 April

2 ... leds to outperformnce Swiss Re s P&C premium nd underwriting profit shre vs top 8 reinsurers 60% 50% 40% 30% 20% 10% 0% underwriting loss 1 : Top 8 reinsurers: USD 6.0bn in u/w loss Swiss Re: USD 0.2bn in u/w loss Swiss Re premium shre of 19%, shre of u/w loss of 3% Premiums U/W profit (red=loss) 1 Underwriting profit = GAAP premiums erned - clims nd clims djustment expenses - cquisition costs - other expenses Top 8 reinsurers include: Swiss Re, Munich Re, Hnnover Re, PrtnerRe, SCOR, Generl Re, Everest Re, Trnstlntic Re Source: Swiss Re Economic Reserch nd Consulting Swiss Re's underwriting outperformnce in P&C : bove verge shre in underwriting profits : significntly below verge shre of underwriting loss Investors' Dy Underwriting London, 17 April R&D A vlue driver in underwriting Re-/insurnce is knowledge business R&D provides competitive dvntge requires economies of scle tht re brrier to entry Exmple Swiss Re's pndemic flu model determines the excess mortlity cused by flu viruses of vrying severities nnul probbility 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Insured-ge excess mortlity due to pndemic influenz Exmple USA 0.0% Deths / 1000 (ge weighted to represent insurnce portfolio) UK Cnd South Americ Chin Indi 1918 virus in the USA in virus in the USA tody Investors' Dy Underwriting London, 17 April

3 Portfolio steering Concentrting on segments offering mximum vlue 60% % % % % Property premium (LHS) Csulty premium (LHS) Price qulity property vs csulty (RHS) Ability to mnge/steer risk globlly cross ll business units nd product types, with common risk metrics, re key to optimising cpitl lloction nd mximising economic profit Investors' Dy Underwriting London, 17 April Underwriting Setup CEO/EC Reinsurnce Corporte Solutions Admin Re UW tem UW tem UW tem CUO Investors' Dy Underwriting London, 17 April

4 Conclusion Swiss Re is fully committed to cycle mngement nd portfolio steering Continued focus on mximising bsolute economic profit, subject to Group risk ppetite Chief Underwriting Office invests in R&D nd continues to deliver the strtegic underwriting cpbility t Group level Incresed speed to mrket nd proximity to clients s trnsctionl underwriting is directly embedded in Business Units Decision mtrix between underwriting nd sles within ech Business Unit Underwriting is core strength of Swiss Re Investors' Dy Underwriting London, 17 April Cutionry note on forwrd-looking sttements Certin sttements nd illustrtions contined herein re forwrd-looking. These sttements nd illustrtions provide current expecttions of future events bsed on certin ssumptions nd include ny sttement tht does not directly relte to historicl fct or current fct. Forwrd-looking sttements typiclly re identified by words or phrses such s nticipte, ssume, believe, continue, estimte, expect, foresee, intend, my increse nd my fluctute nd similr expressions or by future or conditionl verbs such s will, should, would nd could. These forwrd-looking sttements involve known nd unknown risks, uncertinties nd other fctors, which my cuse Swiss Re s ctul results of opertions, finncil condition, solvency rtios, liquidity position or prospects to be mterilly different from ny future results of opertions, finncil condition, solvency rtios, liquidity position or prospects expressed or implied by such sttements. Such fctors include, mong others: further instbility ffecting the globl finncil system nd developments relted thereto, including s result of concerns over, or dverse developments relting to, sovereign debt of euro re countries; further deteriortion in globl economic conditions; Swiss Re s bility to mintin sufficient liquidity nd ccess to cpitl mrkets, including sufficient liquidity to cover potentil recpture of reinsurnce greements, erly clls of debt or debt-like rrngements nd collterl clls due to ctul or perceived deteriortion of Swiss Re s finncil strength or otherwise; the effect of mrket conditions, including the globl equity nd credit mrkets, nd the level nd voltility of equity prices, interest rtes, credit spreds, currency vlues nd other mrket indices, on Swiss Re s investment ssets; chnges in Swiss Re s investment result s result of chnges in its investment policy or the chnged composition of its investment ssets, nd the impct of the timing of ny such chnges reltive to chnges in mrket conditions; uncertinties in vluing credit defult swps nd other credit-relted instruments; possible inbility to relise mounts on sles of securities on Swiss Re s blnce sheet equivlent to their mrk-to-mrket vlues recorded for ccounting purposes; the outcome of tx udits, the bility to relise tx loss crryforwrds nd the bility to relise deferred tx ssets (including by reson of the mix of ernings in jurisdiction or deemed chnge of control), which could negtively impct future ernings; the possibility tht Swiss Re s hedging rrngements my not be effective; the lowering or loss of finncil strength or other rtings of Swiss Re compnies, nd developments dversely ffecting Swiss Re s bility to chieve improved rtings; the cycliclity of the reinsurnce industry; uncertinties in estimting reserves; uncertinties in estimting future clims for purposes of finncil reporting, prticulrly with respect to lrge nturl ctstrophes, s significnt uncertinties my be involved in estimting losses from such events nd preliminry estimtes my be subject to chnge s new informtion becomes vilble; the frequency, severity nd development of insured clim events; cts of terrorism nd cts of wr; mortlity, morbidity nd longevity experience; policy renewl nd lpse rtes; extrordinry events ffecting Swiss Re s clients nd other counterprties, such s bnkruptcies, liquidtions nd other credit-relted events; current, pending nd future legisltion nd regultion ffecting Swiss Re or its ceding compnies; legl ctions or regultory investigtions or ctions, including those in respect of industry requirements or business conduct rules of generl pplicbility; chnges in economic theory or principles; significnt investments, cquisitions or dispositions, nd ny delys, unexpected costs or other issues experienced in connection with ny such trnsctions; chnging levels of competition; opertionl fctors, including the efficcy of risk mngement nd other internl procedures in mnging the foregoing risks; nd chllenges in implementtion, dverse responses from counterprties, regultors or rting gencies, or other issues rising from, or otherwise relting to, the chnges in Swiss Re's corporte structure. These fctors re not exhustive. Swiss Re opertes in continully chnging environment nd new risks emerge continully. Reders re cutioned not to plce undue relince on forwrd-looking sttements. Swiss Re undertkes no obligtion to publicly revise or updte ny forwrd-looking sttements, whether s result of new informtion, future events or otherwise. This communiction is not intended to be recommendtion to buy, sell or hold securities nd does not constitute n offer for the sle of, or the solicittion of n offer to buy, securities in ny jurisdiction, including the United Sttes. Any such offer will only be mde by mens of prospectus or offering memorndum, nd in complince with pplicble securities lws. Investors' Dy Underwriting London, 17 April

5 Risk Mngement Dvid Cole, Group Chief Risk Officer Investors' Dy, London, 17 April 2012 Risk Mngement Introduction Group Chief Risk Officer BU CROs re members of respective mngement tems; independence mintined by solid reporting line to Group CRO CRO Reinsurnce CRO Corporte Solutions CRO Admin Re Centrl RM units Centrl Risk Mngement units estblish nd mintin the overll risk frmework Provides checks nd blnces to BU risk nd cturil tems Risk Mngement structure ligned with the Group Incresed bility to support BUs in ccepting good risks while mintining oversight Investors' Dy Risk Mngement London, 17 April

6 Risk Mngement mndte Control nd oversight of Group nd Business Units GROUP LEVEL ROLE Proposing Group risk policies nd risk limits, monitoring exposure ginst Group limits Developing nd mintining risk models Mesuring economic cpitl requirements Identifying, mesuring, monitoring & reporting on risk developments Mnging reltionships with externl stkeholders relted to Risk Mngement Designing & mnging n integrted second line of defence Setting up frmework to enble good risk tking BUSINESS UNIT OVERSIGHT BUSINESS UNIT SERVICING Proposing Business Unit risk policies nd risk limits consistent with Group risk policy, monitor exposure ginst Business Unit limits Advising on risk-tking ctivities of the Business Units, providing independent sign-off on mteril risk decisions Mesuring economic cpitl dequcy & liquidity risk ginst trgets Vlidting pricing models Executing second line of defence ssurnce Clculting policy nd clims reserves Conducting economic vlutions Conducting risk reporting Monitoring, ensuring dherence to risk frmework Dy-to-dy reserving nd reporting ctivities Investors' Dy Risk Mngement London, 17 April Risk Mngement is embedded in the Group nd Business Units' steering process Group Risk Policy nd tolernce Strtegy Limit monitoring Accumultion control Reporting of risk chnges nd impct on cpitl dequcy Portfolio & performnce mesurement Decision mking Cpitl lloction & trget setting Risk model outputs used s inputs in optimistion for pln Testing of risk tolernce Prt of ll decision tking bodies concerned with risk tking Lrge trnsction pprovl Risk Mngement stndrds Investors' Dy Risk Mngement London, 17 April

7 Risks re diversified cross the Group Stndlone shortfll bsed on 1-yer 99% Til VR of USD 27.2 billion 1 results in Group cpitl requirement fter llowing for diversifiction of USD 16.7 billion. P&C 28% Credit 7% L&H 26% Finncil Mrket 39% Diversifiction 4% Costing & Reserving 5% Infltion 4% TC North Atlntic 2% Other P&C 7% P&C 18% L&H 24% Mortlity trend 13% Lethl pndemic 13% Longevity -2% USD 16.7bn 1 Simple sum, s of 31 Dec 2011, prior to diversifiction; both pre- nd post-diversifiction cpitl requirements re for internl model nd disclosed in 2011 nnul report Credit 7% Finncil Mrket 51% Credit spred 27% Equity 13% Foreign exchnge 4% Other FM risk 7% Investors' Dy Risk Mngement London, 17 April Summry Risk Mngement is core to Swiss Re's business model Embedded in ll of Swiss Re's risk-tking ctivities Mndted nd structured to support nd control both Swiss Re Group nd the Business Units Independence mintined by Business Unit dedicted risk units reporting to Group CRO, with strong mndte to chllenge Long-term stbility nd growth supported by fully integrted view of risk Investors' Dy Risk Mngement London, 17 April

8 Cutionry note on forwrd-looking sttements Certin sttements nd illustrtions contined herein re forwrd-looking. These sttements nd illustrtions provide current expecttions of future events bsed on certin ssumptions nd include ny sttement tht does not directly relte to historicl fct or current fct. Forwrd-looking sttements typiclly re identified by words or phrses such s nticipte, ssume, believe, continue, estimte, expect, foresee, intend, my increse nd my fluctute nd similr expressions or by future or conditionl verbs such s will, should, would nd could. These forwrd-looking sttements involve known nd unknown risks, uncertinties nd other fctors, which my cuse Swiss Re s ctul results of opertions, finncil condition, solvency rtios, liquidity position or prospects to be mterilly different from ny future results of opertions, finncil condition, solvency rtios, liquidity position or prospects expressed or implied by such sttements. Such fctors include, mong others: further instbility ffecting the globl finncil system nd developments relted thereto, including s result of concerns over, or dverse developments relting to, sovereign debt of euro re countries; further deteriortion in globl economic conditions; Swiss Re s bility to mintin sufficient liquidity nd ccess to cpitl mrkets, including sufficient liquidity to cover potentil recpture of reinsurnce greements, erly clls of debt or debt-like rrngements nd collterl clls due to ctul or perceived deteriortion of Swiss Re s finncil strength or otherwise; the effect of mrket conditions, including the globl equity nd credit mrkets, nd the level nd voltility of equity prices, interest rtes, credit spreds, currency vlues nd other mrket indices, on Swiss Re s investment ssets; chnges in Swiss Re s investment result s result of chnges in its investment policy or the chnged composition of its investment ssets, nd the impct of the timing of ny such chnges reltive to chnges in mrket conditions; uncertinties in vluing credit defult swps nd other credit-relted instruments; possible inbility to relise mounts on sles of securities on Swiss Re s blnce sheet equivlent to their mrk-to-mrket vlues recorded for ccounting purposes; the outcome of tx udits, the bility to relise tx loss crryforwrds nd the bility to relise deferred tx ssets (including by reson of the mix of ernings in jurisdiction or deemed chnge of control), which could negtively impct future ernings; the possibility tht Swiss Re s hedging rrngements my not be effective; the lowering or loss of finncil strength or other rtings of Swiss Re compnies, nd developments dversely ffecting Swiss Re s bility to chieve improved rtings; the cycliclity of the reinsurnce industry; uncertinties in estimting reserves; uncertinties in estimting future clims for purposes of finncil reporting, prticulrly with respect to lrge nturl ctstrophes, s significnt uncertinties my be involved in estimting losses from such events nd preliminry estimtes my be subject to chnge s new informtion becomes vilble; the frequency, severity nd development of insured clim events; cts of terrorism nd cts of wr; mortlity, morbidity nd longevity experience; policy renewl nd lpse rtes; extrordinry events ffecting Swiss Re s clients nd other counterprties, such s bnkruptcies, liquidtions nd other credit-relted events; current, pending nd future legisltion nd regultion ffecting Swiss Re or its ceding compnies; legl ctions or regultory investigtions or ctions, including those in respect of industry requirements or business conduct rules of generl pplicbility; chnges in economic theory or principles; significnt investments, cquisitions or dispositions, nd ny delys, unexpected costs or other issues experienced in connection with ny such trnsctions; chnging levels of competition; opertionl fctors, including the efficcy of risk mngement nd other internl procedures in mnging the foregoing risks; nd chllenges in implementtion, dverse responses from counterprties, regultors or rting gencies, or other issues rising from, or otherwise relting to, the chnges in Swiss Re's corporte structure. These fctors re not exhustive. Swiss Re opertes in continully chnging environment nd new risks emerge continully. Reders re cutioned not to plce undue relince on forwrd-looking sttements. Swiss Re undertkes no obligtion to publicly revise or updte ny forwrd-looking sttements, whether s result of new informtion, future events or otherwise. This communiction is not intended to be recommendtion to buy, sell or hold securities nd does not constitute n offer for the sle of, or the solicittion of n offer to buy, securities in ny jurisdiction, including the United Sttes. Any such offer will only be mde by mens of prospectus or offering memorndum, nd in complince with pplicble securities lws. Investors' Dy Risk Mngement London, 17 April

9 Asset Mngement Dvid J. Blumer, Group Chief Investment Officer Asset Mngement Introduction Asset Mngement function remins responsible for mnging both the Group's nd the Business Units' (BUs) investments A top-down group-wide consistent investment strtegy is prudently pplied cross the BUs The BUs' Asset Libility Mngement (ALM) chrcteristics nd objectives re reflected in the BUs' strtegic sset lloctions (SAAs) ALM is the cornerstone of the investment process Integrted risk lloction principles re used to llocte cpitl nd mnge risk Investors' Dy Asset Mngement London, 17 April

10 Asset Mngement Integrted investment process t Group nd BU levels Top-down investment view Business considertions Cpitl/liquidity considertions Group SAA / BU SAAs Investment views nd mrket scenrios Determine preferred investment universe Business Units' chrcteristics, objectives nd considertions Risk prmeteristion nd modeling Internl nd externl cpitl nd liquidity requirements Detiled nlysis of the current portfolio Trget metrics pplied BU SAAs tilored to their needs nd objectives Group nd BU SAAs consistent with top-down investment strtegy nd cpitl nd liquidity cpcity Investors' Dy Asset Mngement London, 17 April Asset Mngement Consistent top-down investment strtegy ) Bseline nd lterntive scenrios b) Trigger points c) Key mrket drivers Asset flows Reltive vlue Til risks Riskrewrd Bseline scenrio Country selection Mcro bseline Mrket consensus Trigger points defined to ssess if moving within or wy from bseline scenrio Identify key mrket drivers Impct? Adjustment needed? Fiscl vulnerbility rdr Asset lloction scorecrd Sustinbility fctors Fiscl development EM infltion US housing Policy etc Risk ppetite index Tools developed to monitor key mrket drivers Policy stimulus d) Constntly observe impct on bseline djust, if necessry Investors' Dy Asset Mngement London, 17 April

11 Asset Mngement Governnce Unchnged t Group level New Business Units level Group BoD EC pproves Group strtegic sset lloction (SAA) Asset Mngement consolidtes Group SAA reflecting Business Units' SAA Reinsurnce Corporte Solutions Admin Re SAA pproved by governing Bords Investment governnce t Group level lrgely unchnged BUs' considertions nd needs reflected in investment governnce structure Consistency of investment strtegy between Group nd BUs fully ensured Investors' Dy Asset Mngement London, 17 April Investment mix nd mid-term pln Business Units nd Group 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2% 0-5% 5% 0-5% 0-5% 4% 0-5% 3% 0-5% 0-5% 8% 0-5% 5-15% 7% 5-10% 16% 5-15% 14% 10-30% 13% 18% 20-30% 7% 10-20% 7% 3% 15-30% 39% 40-50% 5% 0-10% 5-15% 6% 5-10% 5-10% 5% 42% 51% 5-15% 40-60% 59% 49% 40-60% 35-55% 35-55% 46% 30-50% 28% 10-25% 25% 14% 5-15% 5-15% 6% 5% 18% 10-20% End FY 2011 Mid-term Pln End FY 2011 Mid-term Pln End FY 2011 Mid-term Pln End FY 2011 Mid-term Pln End FY 2011 Mid-term Pln P&C Reinsurnce L&H Reinsurnce Corporte Solutions Admin Re Swiss Re Group Csh, csh equivlents nd short-term investments Securitised products Equities nd lterntives Investors' Dy Asset Mngement London, 17 April 2012 Government bonds (incl. gency) Corporte bonds (incl. lons) Other (incl. derivtives) 6

12 Summry Flexible nd trnsprent investment strtegy nd process upheld Mtching libilities t Group nd BU level with corresponding ssets bsed on economic view nd within defined limits nd controls Controlled nd structured investment decisions t ll levels Fully in line with Group's overll risk tolernce nd cpitl utilistion nd now lso reflecting BUs' individul risk limits nd cpitl lloctions Enhnced trnsprency of investment governnce Lrgely unchnged for Group nd for in-house/outsourced mndtes, s well s tilored SAAs to individul BUs' chrcteristics nd objectives Investors' Dy Asset Mngement London, 17 April

13 Q&A Investors' Dy Asset Mngement London, 17 April Cutionry note on forwrd-looking sttements Certin sttements nd illustrtions contined herein re forwrd-looking. These sttements nd illustrtions provide current expecttions of future events bsed on certin ssumptions nd include ny sttement tht does not directly relte to historicl fct or current fct. Forwrd-looking sttements typiclly re identified by words or phrses such s nticipte, ssume, believe, continue, estimte, expect, foresee, intend, my increse nd my fluctute nd similr expressions or by future or conditionl verbs such s will, should, would nd could. These forwrd-looking sttements involve known nd unknown risks, uncertinties nd other fctors, which my cuse Swiss Re s ctul results of opertions, finncil condition, solvency rtios, liquidity position or prospects to be mterilly different from ny future results of opertions, finncil condition, solvency rtios, liquidity position or prospects expressed or implied by such sttements. Such fctors include, mong others: further instbility ffecting the globl finncil system nd developments relted thereto, including s result of concerns over, or dverse developments relting to, sovereign debt of euro re countries; further deteriortion in globl economic conditions; Swiss Re s bility to mintin sufficient liquidity nd ccess to cpitl mrkets, including sufficient liquidity to cover potentil recpture of reinsurnce greements, erly clls of debt or debt-like rrngements nd collterl clls due to ctul or perceived deteriortion of Swiss Re s finncil strength or otherwise; the effect of mrket conditions, including the globl equity nd credit mrkets, nd the level nd voltility of equity prices, interest rtes, credit spreds, currency vlues nd other mrket indices, on Swiss Re s investment ssets; chnges in Swiss Re s investment result s result of chnges in its investment policy or the chnged composition of its investment ssets, nd the impct of the timing of ny such chnges reltive to chnges in mrket conditions; uncertinties in vluing credit defult swps nd other credit-relted instruments; possible inbility to relise mounts on sles of securities on Swiss Re s blnce sheet equivlent to their mrk-to-mrket vlues recorded for ccounting purposes; the outcome of tx udits, the bility to relise tx loss crryforwrds nd the bility to relise deferred tx ssets (including by reson of the mix of ernings in jurisdiction or deemed chnge of control), which could negtively impct future ernings; the possibility tht Swiss Re s hedging rrngements my not be effective; the lowering or loss of finncil strength or other rtings of Swiss Re compnies, nd developments dversely ffecting Swiss Re s bility to chieve improved rtings; the cycliclity of the reinsurnce industry; uncertinties in estimting reserves; uncertinties in estimting future clims for purposes of finncil reporting, prticulrly with respect to lrge nturl ctstrophes, s significnt uncertinties my be involved in estimting losses from such events nd preliminry estimtes my be subject to chnge s new informtion becomes vilble; the frequency, severity nd development of insured clim events; cts of terrorism nd cts of wr; mortlity, morbidity nd longevity experience; policy renewl nd lpse rtes; extrordinry events ffecting Swiss Re s clients nd other counterprties, such s bnkruptcies, liquidtions nd other credit-relted events; current, pending nd future legisltion nd regultion ffecting Swiss Re or its ceding compnies; legl ctions or regultory investigtions or ctions, including those in respect of industry requirements or business conduct rules of generl pplicbility; chnges in economic theory or principles; significnt investments, cquisitions or dispositions, nd ny delys, unexpected costs or other issues experienced in connection with ny such trnsctions; chnging levels of competition; opertionl fctors, including the efficcy of risk mngement nd other internl procedures in mnging the foregoing risks; nd chllenges in implementtion, dverse responses from counterprties, regultors or rting gencies, or other issues rising from, or otherwise relting to, the chnges in Swiss Re's corporte structure. These fctors re not exhustive. Swiss Re opertes in continully chnging environment nd new risks emerge continully. Reders re cutioned not to plce undue relince on forwrd-looking sttements. Swiss Re undertkes no obligtion to publicly revise or updte ny forwrd-looking sttements, whether s result of new informtion, future events or otherwise. This communiction is not intended to be recommendtion to buy, sell or hold securities nd does not constitute n offer for the sle of, or the solicittion of n offer to buy, securities in ny jurisdiction, including the United Sttes. Any such offer will only be mde by mens of prospectus or offering memorndum, nd in complince with pplicble securities lws. Investors' Dy Asset Mngement London, 17 April