Third quarter 2008 results

Transcription

1 Third quarter 28 results Analyst and investor conference call Today s agenda Introduction Susan Holliday, Head IR Business performance George Quinn, CFO Questions & answers Slide 2

2 Today s agenda Introduction Susan Holliday, Head IR Business performance George Quinn, CFO Questions & answers Slide 3 Note on risk factors Global financial markets have been experiencing extreme volatility and disruption for more than 12 months Governments in various countries have undertaken initiatives in an attempt to stilise the financial markets. These initiatives may fail. Future material deterioration in business conditions may have a significant impact on Swiss Re s capital and liquidity positions As a result of the extreme and unprecedented volatility and disruption, we are exposed to significant financial, capital market and other risks, including movements in interest rates, credit spreads, equity prices, and currency movements, changes in rating agency policies or practices, and the lowering or loss of financial strength or other ratings We disclaim any obligation to provide updates other than as part of our regular fiscal period-end reporting Slide 4 Please see the note on risk factors on pages 49/5 of the report and the cautionary note on forward-looking statements on slide 57 of this presentation

3 Strong balance sheet, earnings impacted by investment markets CHF YTD 28 Group net income: -34m 884m Earnings per share: Shareholders equity: 24.1bn - Book value per share: Annualised RoE: -4.9% 4.3% Strong balance sheet, significant excess capital maintained against all key benchmarks Focus on quality in P&C business, good combined ratio in quarter despite higher nat cats Investment market outlook uncertain but increasing demand for P&C and L&H solutions likely to lead to better pricing Slide 5 Key figures Gross premiums written Net premiums earned Net income Earnings per share (in CHF) Return on equity (in %) Q % % -1% -16% YTD % Operating income, Q3 27 YTD 28 Property & Casualty Life & Health Financial Markets 1 (net of asset management) Group items % -134% CHF Book value per share Q % Slide 6 1 Including structured CDS and portfolio CDS in run-off

4 Period 1 Period 2 Property & Casualty Continued disciplined underwriting Premiums earned -24% Operating income -94% Combined ratio, traditional % 17.3pts % 99.8% Q3 27 Lower premiums driven by strict underwriting and higher client retentions Volumes also impacted by quota share agreement with Berkshire Hathaway and foreign exchange movements Slide 7 Q Good underwriting performance more than offset by lower investment result and decrease in volume across all lines of business Realised losses of CHF 611m vs. CHF 194m in Q3 27 Excluding impact of foreign exchange and realised investment losses, the underlying business result decreased by 58% Q3 27 Nat cats moderately ove expectations, driven largely by Ike and higher than Q3 27 No significant prior year reserving impact Combined ratio excluding unwind of discount 97.6% P&C traditional business Good combined ratio despite higher nat cats P&C traditional combined ratios %, premiums and operating income in Property Casualty Liility Motor Accident (A&H) Specialty Credit Other Specialty Q % 132.% 136.8% 88.1% 191.7% 53.4% 54.% 54.1% traditional 82.5% Third excl. Quarter unwind 28 results8.6% Conference non-trad. call Slide % 125.3% 119.3% 123.4% 149.5% 94.6% 124.3% 78.8% 99.8% 97.6% Main drivers of change Good performance despite impact of hurricanes Ike and Gustav Absence of A&E development compared to 27 Mainly driven by poor experience and reserve adjustments Prior year development in workers compensation, lower impact than in 27 Reserve strengthening on trade credit and surety due to anticipated higher claims Higher nat cat impact in Marine, continued strong results from Aviation and Engineering Premiums Operating income CR, trad.; % YTD % 114.3% 18.1% 14.6% 16.7% 89.% 113.8% 77.6% 96.4% 94.4%

5 Life & Health Higher mortality and lower investment results Operating revenues -15% Q3 27 Slide Excluding foreign exchange, premiums increased by 7% driven by new and in-force business Sale of new business operations of Tomorrow to LV= in Dec 27 Operating income Q Realised investment losses and lower net investment income Lower technical result mainly driven by higher mortality in traditional life (CHF -126m) and positive reserve development in 27 not repeated Excluding impact of foreign exchange and realised investment losses, the underlying business result decreased by 97% Benefit ratio % 79.% Q pts. 91.5% Higher mortality compared to positive experience in the same quarter of benefited from positive reserve development in life and health Life & Health Operating income breakdown Technical result: premiums, benefits, acquisition costs, net interest credited to policyholders Fees: fee income from policyholders Investment result: non-participating net investment income, other revenues Realised investment gains/losses: non-participating Expenses: other expenses Q1 27 Q2 27 Q3 27 Q4 27 Q1 28 Q2 28 Slide 1 Technical result Fees Realised inv. gains/losses Expenses Investment result Operating income Presentation takes into account netting of unit-linked and with-profit business where appropriate. Aggregation by categories may be refined in the future

6 Financial Markets Challenging market conditions Operating income Return on Investments % -2.3pts. return on inv. assets 2 % -11.5pts % 9.% Q Expense ratio 1 5bps (vs. 15bps Q3 27) increase driven by lower avg. Third assets Quarter 28 results Net investment income decreased 33% at constant FX; mainly due to lower income from equities and alternative investments and a decrease in the running yield from 5.4% in Q3 27 to 4.5% in Mark-to-market impact from structured CDS CHF -289m Q3 27 impacted by mark-to-market losses across all asset classes, as well as impairments and realised losses on the equities portfolio Mark-to-market losses partially offset by credit, interest rate and equity protection Annualised return on investments 3.4% YTD 28 (4.8% in 27) RoI of 3.3% for credit and rates and -27.2% for equities and alternative investments 1.6% -2.5% Q3 27 return in reflects decrease in unrealised gains/losses mainly on fixed income portfolio due to credit spread widening return for credit and rates is -.3% and for equities & alternative investments is -37.3% return YTD 28 is -1.2% (credit and rates -.3%, equities and alternative investments -13.3%) Slide 11 1 Proprietary investment expenses over average invested assets 2 return includes change in unrealised gains/losses Overall investment portfolio More than 5% cash, short-term investments, treasuries or government backed CHF bn Balance sheet values Unit-linked investments With-profit business Balance sheet values (excl. unit-linked and with-profit business) End Q End Q Cash and cash equivalents Short-term investments Government bonds Equities Corporate bonds Agency structured products Other structured products Mortgages Loans (incl. policy loans) Other investments (incl. real estate) 9% 3% 1% 16% 5% 2% 6% 7% Increase due to FX movements offset by change in market values 4% 29% 1% 3% 1% 16% 7% 18% 9% 3% 2% 31% Slide 12

7 Duration exposure Sensitivities (DV1) CHFm per basis point movement Liilities Assets Government bonds Agency debt Structured products Corporate bonds Derivatives Net total exposure End Q End Q Comments DV1 is the sensitivity of Swiss Re s investment portfolio per basis point shift in the yield curve. As of 3 September the value of the investment portfolio decreases by CHF 1.3m for each basis point yield curve shift upwards Swiss Re is generally duration matched, although this may fluctuate Slide 13 Corporate bonds Hedging increased by end of Sept 28 End Q2 28 Sensitivity End (CR1) Market value Hedging notional Net total Key points Market value Hedging notional Net total Hedging increased particularly in September Swiss Re remains exposed to volatility and basis risk Sensitivity (CR1) Corporate bond portfolio continues to be actively managed, adjusting derivative hedges with market movements Slide 14 Sensitivity... CR1 is the sensitivity of Swiss Re s investment portfolio per basis point move in credit spreads. As of 3 September the net impact on the corporate bond portfolio would be a decrease of CHF.8m for each basis point credit spreads widen Hedging is presented on a notional basis; however, when viewed on an economic risk basis, hedging may have a greater impact on the portfolio Categories have been adjusted based on a detailed review of the underlying investments

8 Structured products Highly rated portfolio, continued efforts to mitigate downside risk The Group has subprime exposures within the trading portfolio. Gross notional exposure is CHF 3. bn. The Group has used ABX index products to reduce risk of loss and effects of mark-to-market volatility There is no assurance that this hedge will be effective. We may increase, decrease or discontinue hedging depending on our view of market conditions End Q2 28 Sensitivity End (CR1) Market value Market value Key points Sensitivity (CR1) Market value increase due to FX effects The Group has purchased CDS protection as a proxy hedge for its structured product portfolio. There is significant basis risk. As of September 3, the hedge notional equalled CHF 6.6bn with a CR1 sensitivity of CHF 3.1m Portfolio remains of high rating quality coupled with a dynamic hedging programme 13.2 Slide 15 Hedging is presented on a notional basis; however, when viewed on an economic risk basis, hedging may have a greater impact on the portfolio Shareholders equity end Reduction due to higher unrealised losses partially offset by positive foreign exchange impacts in shareholders equity Conference 2 call Zurich, 4 November 3 June Net income Shares repurchased Slide 16 Other movements in own shares Foreign currency translation adjustments Net change in unrealised gains/losses 3 September 28

9 Summary and outlook Strong underwriting and balance sheet Port of call Bolder principal Talent and culture Insurance risk transformation, syndication and trading Net income of CHF -34m, EPS CHF -.93 (YTD: CHF 884m, CHF 2.66) Strong balance sheet, excess capital ove AA level estimated to be in the range CHF 5.bn - CHF 5.5bn as of 3 September 28. Buy-back suspended in current market conditions Continuous focus on quality in Property & Casualty business, good combined ratio in quarter with higher nat cats. Pricing outlook improving Life & Health impacted by lower investment performance and higher mortality, potential for Admin Re deals that meet our criteria 14% RoE and 1% EPS growth over-the-cycle targets unchanged; composition of earnings will change We remain exposed to volatility but are well positioned for new business opportunities Slide 17 Today s agenda Introduction Susan Holliday, Head IR Business performance George Quinn, CFO Questions & answers Slide 18

10 Appendix Slide 19 Contents Group income statement Business segment results Q3 28 Segment results and FX impacts per business line Group items Fixed income securities Corporate bonds Structured products Wrapped assets Commercial mortgage-backed securities Equities Alternative Investments Structured CDS Corporate Portfolio CDS Financial guarantee reinsurance Unit-linked and with-profit assets Other assets/liilities Net investment income Net realised gains Net realised gains - other asset classes Impairments Net unrealised gains Return on investments basis Return on investments calculation Return on equity calculation Shareholders equity 28 YTD Swiss Re s effective capital management Number of shares Exchange rates Corporate calendar & contacts Cautionary note on forwardlooking statements Group income statement Q3 27 YTD 28 Revenues Premiums earned Fee income from policyholders Net investment income Net realised investment gains/losses Other revenues revenues % -13% -37% 47% 19% -32% Expenses Claims and claim adjustment expenses; life & health benefits Return credited to policyholders Acquisition costs Other expenses Interest expenses expenses % 45% -18% -11% -34% -1% Operating income before tax expense Income tax expense Net income Slide 2

11 Business segment results Property & Casualty Life & Health Financial Markets Group Items Allocation YTD 28 Revenues Premiums earned Fee income Net investment income Net realised investment gains/losses Fees, commissions and other revenues revenues Expenses Claims and claim adjustment expenses and L&H benefits Return credited to policyholders Acquisition costs Other expenses Interest expenses expenses Operating income/loss before tax Income tax expense Conference Net income call Slide Structured CDS included in Financial Markets net realised investment gains/losses Property & Casualty Segment results Property Trad. Casualty Trad. Specialty Trad. Trad. Non-Trad. P&C P&C YTD 28 Revenues Premiums earned Net investment income Net realised investment gains/losses Other revenues revenues Expenses Claims and claim adjustment expenses Acquisition costs Other expenses expenses Operating income/loss Slide 22

12 Property & Casualty FX impact P&C Q3 27 constant FX 1 P&C vs.q3 27 constant FX 1 Revenues Premiums earned Net investment income Net realised investment gains/losses Other revenues revenues % -36% -75% -31% Expenses Claims and claim adjustment expenses Acquisition costs Other expenses expenses % -33% -7% -5% Operating income/loss % Slide numbers at 28 FX rates Life & Health Segment results Traditional Life Traditional Health Admin Re L&H L&H YTD 28 Revenues Premiums earned Fee income from policyholders Net investment income Net realised investment gains/losses Other revenues revenues Expenses Claims and claim adjustment expenses; life and health benefits Return credited to policyholders Acquisition costs Other expenses expenses Operating income/loss Slide 24

13 Life & Health FX impact L&H Q3 27 constant FX 1 L&H vs.q3 27 constant FX 1 Revenues Premiums earned Fee income from policyholders Net investment income Net realised investment gains/losses Other revenues revenues % -1% -31% 85% -1% -33% Expenses Claims and claim adjustment expenses; life and health benefits Return credited to policyholders Acquisition costs Other expenses expenses % 72% 29% 2% 11% Operating income/loss Slide numbers at 28 FX rates Life & Health Operating income break-down Investment result: non-participating net investment income, other revenues Expenses: other expenses Fees: fee income from policyholders Technical result: premiums, benefits, acquisition costs, net interest credited to policyholders Realised investment gains/losses: non-participating Presentation takes into account netting of unitlinked and with-profit Third business Quarter where 28 results Conference appropriate call Slide 26 Q3 27 vs Op. income Q3 27 Q2 vs Op. income Q Investment result -322 Investment result Expenses Fees Technical result Realised inv. gains/losses Op. income Q A lower net investment income and net realised losses as well as a weak mortality experience are the main drivers for the lower operating income Aggregation by categories may be refined in the future -6 Expenses Fees Technical result Realised inv. gains/losses Op. income Q3 28

14 Financial Markets Segment results Credit and rates Equities & alt. investments Other 1 FM FM YTD 28 Revenues Premiums earned Net investment income Net realised investment gains/losses Other revenues revenues Expenses Claims and claim adjustment expenses Acquisition costs Other operating costs expenses Operating income/loss Slide 27 1 Includes structured CDS and portfolio CDS in run-off Financial Markets FX impact FM Q3 27 constant FX 1 FM vs.q3 27 constant FX 1 Revenues Premiums earned Net investment income Net realised investment gains/losses Other revenues revenues % -29% Expenses Claims and claim adjustment expenses Acquisition costs Other operating costs expenses Operating income Slide numbers at 28 FX rates

15 Group items Q3 27 YTD 28 Revenues Net investment income Net realised investment gains/losses Other revenues Group items income % Expenses Group function expenses Interest expenses Indirect and other taxes Other Interest and other expenses % -43% 53% -35% Slide 29 Fixed income securities YTD running yield 5.2% 5.3% 5.2% 4.9% End Q4 27 Slide 3 End Q1 28 End Q2 28 End Q3 28 running yield 4.5% Running yield reduced due to shift into government bonds and lower interest rates CHF bn Balance sheet values Unit-linked investments With-profit business Balance sheet values (excl. unit-linked and with-profit business) Government bonds Corporate bonds 1 Structured products End Q2 28 End Increase mainly due to shift from short-term investments into government bonds and CHF +1.7bn FX impact End Q2 28 End Decrease due to sales and lower market values partially offset by CHF +2.1bn FX impact End Q End Q End Q2 28 End Increase due to CHF +2.bn FX offset by lower market values 1 Corporate bonds excludes private equity and hedge fund investments 2 Structured products includes US government agencies and net off balance sheet exposures, excludes cat bonds and SCDS Categories have been adjusted based on a detailed review of the underlying investments

16 Corporate bonds Focus on balance sheet protection - increased hedging corporate bonds by rating BBB 34% <BBB 14% NR 2% AAA 5% AA 11% A 34% Resources Basic Industries Cyclical Consumer Goods Cyclical Services Energy, Utilities & Mining Financials General Industrials Information Technology Non Cyclical Consumer Goods Non Cyclical Services End Q Percent of 5% 3% 2% 7% 8% 5% 9% 3% 7% 6% 1% Slide 31 AAA AA A BBB < BBB NR Hedging notional Net total Hedging is presented on a notional basis; however, when viewed on an economic risk basis, hedging may have a greater impact on the portfolio Categories have been adjusted based on detailed review of underlying Structured products 32% is Agency and 54% is AAA Other ABS CHF 7.4bn 96% par Below A 2% AA-A 9% Other structured CHF 1.3bn 81% par Below A 21% N/R % AAA 46% Agency structured products CHF 12.9bn 94% par AAA 89% AA-A 33% CMBS CHF 8.3bn 9% par Slide 32 AA-A 12% Below A 1% AAA 87% 3% 19% 32% RMBS CHF 1.bn 8% par Below A 7% N/R 1% 21% AA-A 25% 23% AAA 69% : CHF 39.9bn (9% par) As of 3 September 28 Includes invested assets and net off balance sheet exposures, excludes cat bonds and SCDS

17 Structured products RMBS total Agency break-down by US government sponsored agencies 34% 11% 55% RMBS Fannie Mae RMBS Freddie Mac RMBS Ginnie Mae Sector RMBS (USD) Agency Non-agency Prime Alt-A Sub-prime (Cash) Sub-prime (Wrapped) RMBS (CAD) Agency Non-agency Prime Alt-A Sub-prime (Cash) Sub-prime (Wrapped) RMBS (ROW) Prime Non-conforming Buy to let Other Market value by rating Agency Aaa Aa-A Below A NR MV Est. % par Slide 33 Group has sub-prime exposures within trading portfolio. Gross notional exposure is CHF 3. billion. The Group has used ABX index products to reduce risk of loss and effects of mark-to-market volatility There is no assurance that this hedge will be effective. We may increase, decrease or discontinue hedging depending on our view of market conditions Analysis of Structured CDS is excluded from tle ove and included on slide 39 As of 3 September 28 Structured products Other total ABS (USD) 7% 19% 32% 42% ABS Auto ABS Cards ABS Student Loans ABS Other ABS (RoW) 51% 36% 13% Sector Agency CMBS CMBS (USD) CMBS (CAD) CMBS (RoW) Other ABS ABS (USD) ABS (CAD; ABS Auto) ABS (RoW) Project loans 423 Project loans (Ginnie 423 Mae) CLO CLO (USD) CLO (RoW) CDO CDO (USD) CDO (RoW) Other structured Other structured (USD) Other struct. (RoW) 423 Market value by rating Aaa Aa-A Below A NR MV Est. % par Slide 34 Analysis of Structured CDS is excluded from tle ove and included on slide 39 As of 3 September 28

18 Wrapped assets Wrapped assets by insurer/wrapper (market values) wrapped ACA AMBAC 444 CIFG 126 FGIC 247 FSA 274 MBIA RADIAN 1 95 XL Ass Wrapped assets by wrapped rating (market values) AAA AA A BBB < BBB Sub-prime Other Slide 35 by wrapped rating Estimated 8% investment grade without the wrap < BBB 2% A 48% AAA 12% AA 2% Where monolines are split rated we have used the lower rating in deriving this information Includes RMBS, CMBS, ABS, CLO, CDO As of 3 September 28 Commercial mortgage-backed securities CMBS market values by geography 4.7%.4% 16.9% 16.3% 61.7% US UK EU excl UK Canada Other Year of issue Pre Market value by rating Aaa % of par Aa-A % % % % % % 33 9% % % of par 89% 84% 79% 78% 85% 82% - 83% Below A % of par - 8% 77% 59% 82% 28% - 51% % of par 98% 93% 94% 92% 89% 87% 9% 9% Slide 36 As of 3 September 28

19 Equities Continued reduction of equity exposure End Q2 28 End Global Equity portfolio Listed Real Estate Strategic Holdings Sub- Hedging delta Net exposure Market values Global Equity portfolio Listed Real Estate Strategic Holdings Sub- Hedging delta Net exposure Market values Slide 37 Key points Further sales in listed equities and real estate Hedging remains in place but aligned with reduced exposure The Group has other equity exposure with an estimated net delta equivalent of CHF 249m Swiss Re s net equity exposure is very low Alternative Investments Well diversified exposures Private equity and hedge funds follow either investment accounting or equity method of accounting End Q2 28 End Hedge Funds Private Equity Real Estate market value Market values Hedge Funds Private Equity Real Estate market value Market values Slide 38 Key points Hedge Funds: broadly diversified portfolio, roughly equally split into fund- of-fund and direct investments Private Equity: both direct and indirect exposure, well diversified Real Estate: direct real estate investments in Switzerland and Germany and indirect private real estate investments well diversified Increases in Real Estate and Private Equity due to funding of existing commitments; no new investments Alternative Investments are well diversified

20 Structured CDS As of 3 September 28 Category CMBS ABS CDO Corp CDO Prime MTG Alt A/Alt B Sub-prime Euro Sub-prime Wrapped ABS TOTAL Par value Par value % Market value Market value % of par value since end Q2 28 Ratings comments as of 3 September 28-9pts. 86% AAA pts. 1% Below IG -7pts. 1% AAA -8pts. 88% AAA -1pts. 3% AAA; 2% AA/A; 5% BBB -7pts. 1% AAA; 31% AA/A; 68% BBB -3pts. 1% AAA -1pts. 81% A; 19% BBB -6pts. mark-to-market loss of CHF 289m Estimated mark-to-market loss during October 28 of CHF 188m, driven by CMBS, prime, Alt A and sub-prime Third Ratings Quarter 28 are results as of 3 September 28 and may change The valuations listed ove are determined by reference to the actual or similar underlying assets. A stress bid offer Slide 39 adjustment is also applied. On 3 September 28 this adjustment amounted to 6% of the notional outstanding. Corporate Portfolio CDS Remaining PCDS book covers well diversified corporate loans Notional exposure to PCDS 3 September Current anticipated amortisation profile 2 1 Slide 4 Dec 7 Jun 8 Dec 8 Jun 9 Dec 9 Jun 1 Dec 1 Anticipated maturity PCDS reference predominately large investment grade and SME corporate loans Concentration limits per name, industry and country Over 59 names with average exposure around CHF 27m Swiss Re attaches at or ove AAA-equivalent level Over 9% of subordination still availle Year-to-date mark-to-market impact CHF -75m (as of 3 September 28)

21 Financial guarantee reinsurance Exposure breakdown Financial Guarantee Re exposure notional exposure (TNE) Public finance (PF) Structured finance (SF) -thereof Residential Mortgage (RMBS) Auto loans Future flow receivles Student loans Operating assets Auto rental fleet securitisations Commercial Mortgage (CMBS) SF Other US SF Other International -Exposure as per latest cedent reporting - Categories based on cedent classification Slide 41 AAA 2.1%.% 9.3% 14.7% 8.6%.% 8.7%.%.% 91.% 3.5% 2.3% AA 22.3% 27.9% 3.% 2.%.%.% 1.2% 2.5%.%.%.% 9.5% A 35.3% 42.8% 9.6% 1.3%.7% 4.6% 1.%.%.% 9.% 26.7% 46.% BBB 37.1% 28.9% 65.3% 33.3% 9.7% 95.4% 71.% 97.5% 85.4%.% 69.8% 42.3% technical reserves CHF 517 million Business put in run-off 28 Partial commutation with one client in October 28 reduces public finance exposure by approx CHF 1bn < BBB- 3.1%.3% 12.7% 48.8%.%.%.%.% 14.6%.%.%.% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%, CHFm In % of TNE % % % % % % 49 12% 366 9% 363 9% 147 4% 269 6% % RMBS Detailed breakdown US RMBS HELOC 386 US RMBS Closed end 2 nd lien 283 US RMBS Midprime/Alt-A 167 US RMBS Sub-prime 13 US RMBS Prime 33 RMBS Other As of 3 September 28 Unit-linked and with-profit assets Unit-linked business Equities trading Fixed income trading Real estate Cash & cash equivalents Short-term investments unit-linked business Slide 42 With-profit business Equities trading Fixed income trading 2 53 Real estate 79 Cash & cash equivalents 13 with-profit business Unit-linked and with-profit investments are included in assets designated as trading

22 Other assets/liilities Other invested assets Accrued expenses and other liilities Derivative instruments Equity accounted companies Other investments Securities purchased under agreement to resell Other assets Securities in transit Securities sold under agreement to repurchase Derivative instruments Securities sold short Securities in transit Other Financial Markets liilities Financial Markets liilities Other liilities Reinsurance related assets Other assets Slide 43 Net investment income Q3 27 YTD 28 Fixed income % Equities % 141 Other asset classes % 814 Investment expenses % -553 Interest paid on cedant deposits % -262 Assets held for with-profit business % 24 Assets held for linked liilities % 585 Net investment income % Running yield decreased to 4.5% in compared to Q % Other assets impacted by lower income mainly from hedge funds and private equity Net investment income decreased in due to FX rates Slide 44

23 Net realised gains Fixed income Q % YTD Equities FX M-T-M Q Q Other asset classes (see next slide for details) Assets held for with-profit business Assets held for linked liilities Foreign exchange remeasurement and designated trading portfolios % -18% -8% net realised investment gains % Net realised losses on fixed income, mainly mark-to-market on assets designated as trading Higher net unrealised losses on equities due to mark-to-market on trading portfolio and realised losses on sales Slide 45 Other asset classes includes net realised gains from derivatives, partially offset by SCDS mark-to-market 1 The designated trading portfolios are foreign currency denominated trading fixed income securities which back certain foreign currency denominated liilities Net realised gains Other asset classes SCDS PCDS Credit Interest rate overlay Equities Unlisted Private Equity Insurance derivatives & ECM Treasury and other Credit includes total derivative result relating to corporate bonds and structured products Slide 46

24 Impairments Government bonds Corporate bonds Structured products Wrapped assets Equities Other Most of the impairments due to a drop in market value of more than 2% Slide 47 Net unrealised gains, pre-tax End Q End Other Real estate Fixed income Equities On BS Off BS On BS Off BS Fixed income unrealised loss as at end of comprises government bonds CHF +.5bn, corporate bonds CHF -1.6bn, structured products CHF -2.1bn Slide 48

25 Return on investments basis This shows the investments included in the RoI calculation CHF bn investments Cash and cash equivalents investment portfolio Unit-linked investments With-profit business (excl. unit-linked and with-profit) Funds held by ceding companies Funds held under reinsurance treaties Securities in transit Financial Markets liilities Policy loans Other FY Where to find? Balance sheet 16.2 Balance sheet Slide Slide 12 Slide 12 Slide 12 Balance sheet Balance sheet Slide 43 Slide 43 Balance sheet (policy loans, mortgages and other loans) Various items Slide 49 Return on investments calculation Credit and rates Equities & alternative investments Foreign exchange remeasurement and designated trading portfolios Q3 27 at avg. FX at avg. FX % Adjustments % Basis for RoI % YTD 28 at avg. FX Average invested assets at avg. FX rates % Return on investments 3.9% 1.6% -2.3pts. 3.4% Slide 5 1 Exclusion of third-party fee business 2 Opening balance plus ½ turnover

26 Return on equity calculation Net income Q YTD Opening equity Closing equity Average equity Time weighted capital movement Time weighted average equity Return on equity, annualised 18.8% -4.9% 4.3% Slide 51 Shareholders equity 28 YTD in shareholders equity year-to-date Third Quarter 3128 December results Net income 27 Slide 52 Shares repurchased Other movements in own shares Foreign currency translation adjustments Net change in unrealised gains/losses Dividend Other (incl. 3 September change in 28 adjustment for pension benefits)

27 Swiss Re s effective capital management Slide 53 Capital structure CHF bn % 11.% Senior long-term financial debt Hybrid capital Mandatory convertibles Shareholders' equity Hybrid to total capital Senior financial debt to total capital % 9.9% % 6.2% % 4.1% % % % 2.4% 2.3% 1.9% %.9% Note: Shareholders equity figures prior to 25 on Swiss GAAP FER basis Mandatory convertible CHF 1bn due in December 28 and CHF.6bn due in June 29 6% 4% 2% % Number of shares Slide 54 Share calculation in millions amount of shares outstanding Shares repurchased via 1st trading line Shares repurchased via 2nd trading line, not yet cancelled Treasury shares Shares reserved for corporate purposes Dividend shares Shares reserved for MCS Shares reserved for ACI Shares linked to employee participation plans (est.) Fully diluted number of shares 1 Assuming maximum number of shares for conversion

28 Exchange rates Geographic gross premiums written split by main currencies Other 17% Average rates Q3 27 Q2 28 Q3 27 / Q2 28 / USD/CHF % +.95% EUR/CHF % -.% GBP/CHF % -.96% CAD/CHF % -.95% CAD 4% GBP 1% EUR 25% USD 44% Closing rates Q3 27 Q2 28 Q3 27 / Q2 28 / USD/CHF % +9.8% EUR/CHF % -1.88% GBP/CHF % -1.48% CAD/CHF % +5.% Slide 55 Corporate calendar & contacts Corporate calendar 19 February 29 Annual results April th Annual General Meeting (Zurich) Investor Relations contact Hotline Investor_Relations@swissre.com Slide 56 Susan Holliday Ross Walker Chris Menth Marc Hermacher Simone Lieberherr

29 Cautionary note on forward-looking statements Certain statements and illustrations contained herein are forward-looking. These statements 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, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others: changes in global economic conditions and the risk of a global economic downturn; acts of terrorism and acts of war; direct and indirect impact of continuing deterioration in the credit markets, and further adverse rating actions by credit rating agencies in respect of structured credit products or other credit-related exposures and of monoline insurance companies; the occurrence of other unanticipated market developments or trends; the ility to maintain sufficient liquidity and access to capital markets; the cyclicality of the reinsurance industry; uncertainties in estimating reserves; the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, currency values and other market indices; changes in Swiss Re s investment results; uncertainties in valuing credit default swaps and other credit-related instruments; possible inility to realise amounts on sales of securities in the Group s investment portfolio equivalent to their mark-to-market values recorded for accounting purposes; the possibility that Swiss Re s hedging arrangements may not be effective; mortality and morbidity experience; policy renewal and lapse rates; changes in rating agency policies or practices; the lowering or loss of one of the financial strength or other ratings of one or more companies in the Group; political risks in the countries in which Swiss Re operates or in which it insures risks; extraordinary events affecting Swiss Re s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events; risks associated with implementing Swiss Re s business strategies; the impact of current, pending and future legislation, regulation and regulatory and legal actions; the impact of significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions, including, in the case of acquisitions, issues arising in connection with integrating acquired operations; changing levels of competition; and the frequency, severity and development of insured claim events; operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks. Conference These factors call are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue Zurich, reliance 4 on forward-looking November 28 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. Slide 57