Creating the future. Investors and Media meeting Monte Carlo, 9 September 2013

Transcription

1 Creating the future Investors and Media meeting Monte Carlo, 9 September 2013

2 Today's agenda Introduction Michel M. Liès, Group CEO Current market environment Differentiation through knowledge Christian Mumenthaler, CEO Reinsurance and Matthias Weber, Group CUO Outlook Michel M. Liès, Group CEO Questions & answers 2

3 Introduction Michel M. Liès, Group CEO 3

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

5 A short journey through our history Some of our first underwriters (Fire),

6 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 6

7 Priorities for the Group CEO Perform and grow Group strategy 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 Address low returns in L&H 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 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 Outperform our peers in P&C 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 7

8 Current market environment 8

9 9 Advert for our US branch, 1934

10 Three year pricing outlook from Monte Carlo 2012 Prices High Low Nat Cats? Continuous reserve releases? Low inflation Industry capitalisation Factors leading to lower prices Low interest rates Regulatory changes Factors leading to higher prices Drivers of re-/ insurance prices 10

11 What happened since? Impact of drivers on reinsurance industry pricing Pricing driver Impact Comments Low interest rates Regulatory changes Despite recent increases, rates are still near historic lows 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 Low inflation Industry capitalisation Reserve releases continue to decline Low inflation is expected to continue in the immediate future Alternative capital is entering the industry, particularly for nat cat risks Nat cat pricing is expected to decrease before stabilising in 2014, other lines of business are expected to remain stable 11

12 Alternative capital is entering the Nat Cat re/insurance market Product split Products Investor Type Growth 5% 40% ILS Asset Managers Dedicated ILS Funds Hedge Funds Pension Funds 47% ILW Dedicated ILS Funds Reinsurers 8% Collateralised Reinsurance Dedicated ILS Funds Hedge Funds ILS ILW Collateralised Sidecar Source: Swiss Re Capital Markets Sidecar Asset Managers Hedge Funds Pension Funds Private Equity Nat Cat offers attractive investment opportunities in a low yield environment Cyclical 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 12

13 Alternative capital focuses on peak cat perils Distribution by peril and segment 5% 25% US cat Europe cat Other 70% 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 33% Backing reinsurers Backing insurers 67% Alternative capital is expected to stay, but has yet to be tested in case of rising interest rates or large catastrophe losses Source: Swiss Re Capital Markets 13

14 Alternative capital has regained market share Estimated size of global market Share of US market USDbn e Sidecar ILW Collateralised ILS 25% 20% 15% 10% 5% 0% e Recent growth mainly driven by collateralised reinsurance Alternative capital currently absorbs approx. 22% of the US Cat reinsurance market, reaching the peak of 2007 Source: Swiss Re Capital Markets 14

15 Cat bond trading implies a new price baseline has been reached Cat bond secondary market spreads Example: US exposed cat bonds with an expected loss between 1.25% and 2.5% in% in% 12 Historically, capital market prices have been volatile, 9 driven by changing supply 6 and demand dynamics 3 0 Cat bond spreads have tightened approx. 30% YoY Capital market prices have stabilized since April 2013 Any rise in interest rates or further spread tightening is likely to reduce the attractiveness of Nat Cat to alternative capital investors Source: Swiss Re Capital Markets 15

16 Demand for Nat Cat capacity will continue to increase Increase in largest industry loss scenarios per region USD bn 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 2012 vs EQ: Earthquake (500 yrs) TC/WS: Tropical Cyclones/Winter Storms (100 yrs); TC includes storm surge FL: River Flood (250 yrs) Demand for nat cat insurance expected to increase on average by approx. 50% in mature markets and 100% in HGM by

17 Renewal Line of business trends Drivers of change Property: 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 Special Lines: 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 17

18 Renewal Line of business trends Drivers of change Liability: Interest rate environment Reserves in recent underwriting years are showing signs of strain Regulatory changes (Solvency II) Motor: 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) Industry outlook Hardening US insurance market, other segments lack clear direction Broad rate increases likely in case of deteriorating reserve adequacy Exposures growing with changes to structures Price development expected to be flat overall, differences by market exist 18

19 Differentiation through knowledge 19

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

21 Differentiated through history Swiss Re is a global operator, with over 60 offices in more than 20 countries Swiss Re has both a superior capital rating 1 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 1 S&P: AA-, stable outlook; Moody's: A1, positive outlook; AM Best A+, stable outlook. Ratings as at 6 September 2013 Swiss Re's charter of foundation,

22 Differentiation through access and solutions 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. Expected economic profit by source Globals division, January 2013 renewals Unique transactions: 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 38% 11% 32% 19% Renewed singleyear deals New single-year deals New multi-year deals Open Market market: Placements Market Placement Tailored solutions deliver exactly what clients need and produce higher margins for Swiss Re 22

23 Comparison of business models along the reinsurance value chain Capitalization Origination Underwriting Portfolio Mgmt. Attribute Description Swiss Re 1. Capital raising capability Nondiversified Reinsurers Alternative Capital Quick access to capital when needed, i.e. post-event 2. Access to business Global physical presence, direct or broker 3. Products offering 4. Value-added offerings 5. Risk selection Broad coverage of perils, full spectrum of products to meet client needs including complex structuring Capacity, underwriting manuals, common product development, knowledge sharing 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 Large diversified reinsurers compare favourably, providing more benefits for clients 23

24 Services and expertise CatNet CatNet Number of hazard maps provided per month 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:

25 CatNet demonstration 25

26 Cat Net Proved its value in Calgary flood Flood footprint Calgary 2013 Swiss Re Global Flood Zones: Flood footprint 2013: PERILS ltd. 26

27 Services and expertise Providing additional value to our clients Property Tailored underwriting training, from introductory courses to advanced seminars Engineering PUMA: Project Underwriting Management Application Agro TWISTER: On line risk assessment tool for weather index business Casualty Partnering on new product development, such as pollution coverage in China 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 27

28 Outlook Michel M. Liès, Group CEO 28

29 Creating the future 29 Our headquarters, 2013

30 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 Deliver on unchanged Group strategy Achieving our financial targets remains the top priority 30

31 31 Our new headquarters, 2017

32 Questions & answers 32

33 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 March 2014 AGM Briefing Call Conference call 11 April th Annual General Meeting Zurich Investor Relations contacts Hotline Eric Schuh Ross Walker Chris Menth Lorenz Fichter Simone Fessler Media Relations contacts Hotline Rolf Tanner Stefanie Weitz Michael Gawthorne Brigitte Meier Lukas Meermann

34 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. 34