UBS Global Insurance Conference

Transcription

1 UBS Global Insurance Is there really an advantage to being global? Jacques Aigrain Chief Executive Officer Swiss Re a global leader Swiss Re is the most diversified reinsurer, founded 1863 Earnings per share Historical, CHF CAGR % Return on equity Historical, in % Average % Total revenues by business Total Group 2007: CHF 42.9bn Headquarters, Zurich Life & Health 46% Property & Casualty 54% Armonk, New York The Gherkin, London Slide 2 Swiss Re remains focused on delivering enhanced sustainle returns to its shareholders; the solid capital base combined with strict underwriting discipline and careful risk selection will result in economic profit growth figures based on US GAAP, 2004 on Swiss GAAP FER

2 Building on our traditional strengths Good performance across all business segments Property & Casualty Life & Health Financial Markets Combined ratio Historical, traditional only, in % Operating income Historical, CHF Return on investment Historical, in % Armonk, New York Excellent 2007 results Strong 2008 renewals to date in challenging environment Sustained quality of returns Strong Admin Re pipeline New products, e.g. varile annuity and longevity Strong 2007 and Q RoI in difficult environment o RoI in Q1 2008: 5.8% Effective protection of corporate bond and equity portfolios Active management of capital employed and portfolio mix will continue to be the foundation for innovation and profitle growth Slide figures based on new segmental reporting; figures based on US GAAP, 2004 on Swiss GAAP FER The road ahead strategic direction Our aspiration To be the leading force in the risk transfer industry, combining professional resources and skills with customer focus to deliver economic profit growth Slide 4 Generate economic profit growth through Intelligent cycle management and efficient capital allocation to achieve EPS growth target Reduce earnings volatility through Our capital markets expertise for hedging both sides of the balance sheet, scale and diversification Enlarge market scope through Growth in emerging markets and new products Talent, culture and organisational efficiency through Efficient processes, cultural diversity and professional development Higher sustainle shareholder returns Best-in-class customer service

3 The roadmap our vision Be the port of call for managing all insurle risks, irrespective of origination channel Estlish leadership in insurance risk transformation, syndication and trading Slide 5 Be a bolder principal to ensure focus on profitle business and investment opportunities Talent and culture Diversification lies at the core of the (re)insurance value proposition Dimensions of diversification Slide 6 The more independent risks are added to a reinsurer s portfolio, the less volatile its economic results become which translates into lower capital needs, and in turn lower capital costs

4 Reinsurance is a global business Diversification reduces capital costs illustrative Simple sum of required capital 25.1 (in CHFbn, as of 31 Dec 2007) 8.5 Diversification effect 16.6 Swiss Re Group base capital requirement Slide 7 Economic benefits of diversification are increasingly recognised by regulators (Swiss Solvency Test, Solvency II); explicit allowance by rating agencies Swiss Re is the most diversified global reinsurer P&C vs. L&H Broad diversification across regions and lines of business Premiums earned in 2007 (CHF 31.7 billion) by region and by product line: 47% Americas 42% Europe 11% Asia Admin Re (including Middle East and Africa) Specialty 14% 4% Non-traditional 2% L&H 36% Property 20% Casualty 24% Swiss Re benefits from geographic and business mix diversification and has the ility to reallocate capital to achieve profitle growth Slide 8 Source: Swiss Re 2007 Annual Report

5 Traditional business vs. run-off for Admin Re and P&C Scalle business with global focus Wholesale insurance solutions XL Facultative Quota share Co-insurance Large commercial risks Capital market solutions P&C run-off solutions Loss portfolio transfer (LPT) Adverse development cover (ADC) L&H run-off solutions Admin Re transactions (over CHF 60bn of assets collected since 1995) Slide 9 Swiss Re can reallocate capital from trad business to attractively priced run-off solutions: Continuous growth potential in the US and UK Capital market turmoil may trigger additional demand for Admin Re /P&C run-off and bulk annuity solutions Possible extension of Admin Re business model to other countries Power of diversification (I/II) Larger corporations equipped to handle large events like Katrina, Rita and Wilma (KRW) Capital of smaller less diversified companies significantly impacted by KRW hurricanes Market capitalisation USD m > 15bn 5 15bn < 5bn 144% Average net claim in % of shareholders' equity = 43% 75% 60% Swiss Re* 45% 30% % Slide 10 0 Notes: Shareholders equity as of 2004; market cap as of * Swiss Re claims estimate net of equalisation reserve release 0% Net claims estimate (before tax) Net claim in % of shareholders' equity Source: Company data

6 Power of diversification (II/II) Berkshire Hathaway quota share 5-year fixed term 20% quota share incepting 1 January 2008 for new and renewed P&C business only Excludes run-off of prior underwriting years Ceding commission equal to acquisition costs plus fixed 14% No restrictions on volumes, no right of access to client data Both parties fully aligned, complete follow the fortunes Released capital used to increase share buy-back by CHF 1.75bn Accretive to RoE and EPS Slide 11 Swiss Re s broadly diversified P&C book led to economically attractive quota share with AAA counterparty P&C: Nat cat deals We profit from business opportunities where we did not in the past Major European Insurer - Peril: WS Europe Structure: EUR 150m xs 150m with an AAD of 300m LTPA: 130% 3 years Annual premiums EUR 16.5m Annual Premium Major UK Insurer - Peril: WS Europe and Flood UK Structure: GBP 100m xs 300m max contributory loss f.g.u. 250m LTPA: 138% 3 years EUR 22.1m EUR 136.4m Major European Insurer - Peril: WS France Structure: EUR 100m xs 125m with an AAD of 100m LTPA: 134% 3 years EUR 8.5m Major US Insurer - Peril: Nat Cat US, but mainly Hurricane and EQ Structure: USD 500m xs 3.5bn 3 years LTPA: 175% EUR 33m Economic Profit Major Australian Insurer - Peril: Nat Cat Australia & New Zealand Structure: AUD 100m xs 100m 3 years LTPA: 114% EUR 8.7m EUR 58.5m Major US Insurer - Peril: Nat Cat US, but mainly TCNA, excl. TC Florida Structure: USD 2bn xs 2bn, aggregate XL 3 resp LTPA: 260% 4 years EUR 47.6m 2008 Slide 12 Enhanced product offering, execution capilities and ility to provide added value to sophisticated buyers has resulted in attractive deals that were difficult if not impossible to carve out in prior soft cycles

7 L&H: Longevity & varile annuities Initiatives from two years ago are now business lines in their own right Longevity Swiss Re active since 2007 USD bn 2'100 1'800 1'500 1'200 Cession rates on new US ordinary life business (recurring only): 61% 59% 56% 47% 40% 36% 70% 60% 50% 40% Friends Provident April 2007 Reinsurance cover GBP 1.7bn block of annuities Co-operative Ins November 2007 Reinsurance cover GBP 1.8bn block of annuities ZFS June 2007 Closed book of 220,000 annuity policies in return for assets worth CHF 9.1bn % Slide 13 '02 '03 '04 '05 '06 '07E Amount reinsured (LHS) Amount retained (LHS) Cession rate (RHS) Sources: SOA/Munich American Re Survey, SR ER&C 20% 10% 0% Varile annuities Swiss Re re-enters VA market in 2006 Appraisal Account value of global in force VA business as per year end 2007: ~USD 10bn New Life & Health products drive profitle growth despite decreasing cession rates Asset side diversification Swiss Re s investment portfolio is broadly diversified Diversification by asset class CHF bn Balance sheet values (excl. unit-linked and participating business) End Q and geography Government bonds Mortgages Loans (incl. Policy loans) Corporate bonds Structured products Equities Alternative investments Cash and short term inv. 4% 9% 22% 9% 20% 32% 1% 3% Japan 1% Rest of world Australia 4% 2% Canada 6% UK 26% Europe (excl. UK) 29% US 32% Slide 14 Swiss Re s broadly diversified asset side also reduces capital requirements Figures before hedging

8 Swiss Re is the most diversified global reinsurer human talent Broad diversity across regions and areas of expertise Swiss Re employees in 2007 (11 702) by region: and by area of expertise: 28% Americas % Europe (including headquarters, Middle East and Africa) % Asia 585 Technical Accounting 10% Risk Mgt. 3% Logistics 6% Legal/ Knowledge 3% IT 11% Other 10% Structuring/ Actuarial 4% HR/ Communication 6% Client Mgt. 10% Asset Mgt. 5% Finance 9% Claims & Li. Mgt. 8% Underwriting 15% Only a large global organisation like Swiss Re can attract and retain the brightest talent worldwide Slide 15 Source: Swiss Re 2007 Annual Report Talent and culture graduates@swissre - we attract and recruit the best talent graduates@swissre: Deal with topics that impact the world Cooperate with bright & highly skilled people like yourselves Benefit from manifold network opportunities around the world Get multifaceted training Experience an exceptional working & learning environment Benefit from an active career management Our graduate programme attracts the brightest talent worldwide, offering young professionals a unique opportunity to shape the future of a global leader in insurance Slide 16 In 2007, 49 young talents from Europe, Asia and the Americas joined our global training programme graduates@swissre; in 2008 we are extending the programme to attract approx. 130 graduates

9 Summary and outlook Challenging conditions but positive outlook Over the cycle targets EPS growth Slide 17 10% RoE 14% Q1 solid earnings from Property & Casualty and Life & Health but negatively impacted by further mark-to-market loss on SCDS Continued focus on quality in Property & Casualty business, cutting business on renewal if pricing is insufficient Property claims in Q2 include Chinese earthquake, European storms and US floods total claims expected to be close to treaty year expectations for quarter Expect profitle growth in Life & Health, driven by new products (incl. VAs, longevity, health in emerging markets) and Admin Re Continuing exposure to market volatility including hedging activities. SCDS Q2 MTM estimated at CHF350m as of mid June. Impairments not expected to be significant, reflecting quality of portfolio Buy back timing dependent on market conditions and other opportunities (CHF 3.6 bn by 20 June 2008, CHF7.75bn target) Questions & answers Slide 18

10 Corporate calendar & contacts Corporate calendar 05 August 2008 Second Quarter 2008 Results ( Call) 08 September 2008 Investors meeting (Monte Carlo) 25 September 2008 Investors day (Zurich) 04 November 2008 Third Quarter 2008 Results ( Call) Investor Relations contact Hotline Slide 19 Susan Holliday Andreas Leu Marc Hermacher Chris Menth Investor_Relations@swissre.com 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; 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; the frequency, severity and development of insured claim events; acts of terrorism and acts of war; 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 or claims-paying ratings of one or more of Swiss Re s subsidiaries; 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 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 forwardlooking statements. 27 June Swiss 2008Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. London, Slide 20