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
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
Strong balance sheet, earnings impacted by investment markets CHF YTD 28 Group net income: -34m 884m Earnings per share: -.93 2.66 Shareholders equity: 24.1bn - Book value per share: 74.16 - 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 %) Q3 27 7 56 7 813 1 469 4.2 18.8% 7 44 6 526-34 -.93-4.9% -1% -16% YTD 28 23 976 19 97 884 2.66 4.3% Operating income, Q3 27 YTD 28 Property & Casualty Life & Health Financial Markets 1 (net of asset management) Group items 1 635 84-124 -665 99-614 -29 1 218-94% -134% 2 226 392-1 541-187 1 65-587 89 CHF Book value per share Q2 28 77.65 74.16-4% Slide 6 1 Including structured CDS and portfolio CDS in run-off
Period 1 Period 2 Property & Casualty Continued disciplined underwriting Premiums earned -24% Operating income -94% Combined ratio, traditional % 17.3pts. 4 775 3 61 1 635 82.5% 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 Q3 27 99 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 Q3 27 47.7% 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 8 79.7% 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 1 332 1 225 653 38 192 863 296 567 3 42 19 3 61 Operating income 195-234 -7-75 -89 42-54 96 3 96 99 CR, trad.; % YTD 28 83.1% 114.3% 18.1% 14.6% 16.7% 89.% 113.8% 77.6% 96.4% 94.4%
Life & Health Higher mortality and lower investment results Operating revenues -15% Q3 27 Slide 9 4 43 3 725 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 Q3 27 84-614 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.% Q3 27 12.5pts. 91.5% Higher mortality compared to positive experience in the same quarter of 27 27 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 1 5 1 5 Investment result: non-participating net investment income, other revenues Realised investment gains/losses: non-participating Expenses: other expenses - 5-1 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
2 15 1 5-5 -1-15 -2 Financial Markets Challenging market conditions Operating income Return on Investments % -2.3pts. return on inv. assets 2 % -11.5pts. 1 75 3.9% 9.% Q3 27-76 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 Q2 28 2.7-17.2-4.8 178.7 End Q3 28 198.6-16. -4.6 178. 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
Duration exposure Sensitivities (DV1) CHFm per basis point movement Liilities Assets Government bonds Agency debt Structured products Corporate bonds Derivatives Net total exposure End Q2 28-66.7 67.3 3.9 7. 7.9 16.5 5..6 End Q3 28-71.5 72.8 36.6 9.3 9. 15.2 2.6 1.3 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 35 5 9 772 25 728 18.6-15.2 3.4 Market value Hedging notional Net total Hedging increased particularly in September Swiss Re remains exposed to volatility and basis risk 31 8 32 556-756 Sensitivity (CR1) 17.5-16.7.8 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
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 38 866 12.5 Market value Key points 39 881 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 27 26 25 25 573-34 -319 88 946-1 96 24 24 78 23 22 21 Conference 2 call Zurich, 4 November 3 June 28 28 Net income Shares repurchased Slide 16 Other movements in own shares Foreign currency translation adjustments Net change in unrealised gains/losses 3 September 28
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
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 7 813 225 2 62-1527 86 9 199 6 526 195 1 646-2 247 12 6 222-16% -13% -37% 47% 19% -32% 19 97 579 6 312-6 12 27 2 93 Expenses Claims and claim adjustment expenses; life & health benefits Return credited to policyholders Acquisition costs Other expenses Interest expenses expenses -5 513-1 642-852 -568-7 549-5 71 742-1 347-756 -377-6 89 1% 45% -18% -11% -34% -1% -14 63 2 268-3 892-2 316-1 2 19 23 Operating income before tax expense Income tax expense Net income 1 65-181 1 469-587 283-34 89-6 884 Slide 2
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 3 61 625-611 6 3 63 2 916 195 847-1 835 2 123 1 229-1 334 29-76 57 524 67 648-1 112 1 9-13 6 526 195 1 646-2 247 12 6 222 19 97 579 6 312-6 12 27 2 93 Expenses Claims and claim adjustment expenses and L&H benefits Return credited to policyholders Acquisition costs Other expenses Interest expenses expenses -2 524-643 -364-3 531-2 547 742-74 -228-2 737-135 -295-43 -29-82 -111-5 71 742-1 347-756 -377-6 89-14 63 2 268-3 892-2 316-1 2 19 23 Operating income/loss before tax Income tax expense Conference Net income call Slide 21 99-614 -76 218-214 Structured CDS included in Financial Markets net realised investment gains/losses -587 283-34 89-6 884 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 1 332 66-141 1 257 1 225 414-338 1 31 863 86-88 -3 858 3 42 566-567 -3 3 416 19 59-44 9 214 3 61 625-611 6 3 63 1 752 2 611-85 47 12 65 Expenses Claims and claim adjustment expenses Acquisition costs Other expenses expenses -759-195 -18-1 62-1 19-21 -144-1 535-534 -199-83 -816-2 483-595 -335-3 413-41 -48-29 -118-2 524-643 -364-3 531-7 24-2 35-1 14-1 379 Operating income/loss 195-234 42 3 96 99 2 226 Slide 22
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 4 392 977-169 24 5 224 3 61 625-611 6 3 63-18% -36% -75% -31% Expenses Claims and claim adjustment expenses Acquisition costs Other expenses expenses -2 369-958 -391-3 718-2 524-643 -364-3 531 7% -33% -7% -5% Operating income/loss 1 56 99-93% Slide 23 1 27 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 2 16 16 331-623 1 74 68 121-83 718 22 179 395-1 129-335 2 916 195 847-1 835 2 123 8 345 579 3 297-4 681 2 7 542 Expenses Claims and claim adjustment expenses; life and health benefits Return credited to policyholders Acquisition costs Other expenses expenses -1 654 282-453 -127-1 952-53 -125-37 -665-39 46-126 -64-12 -2 547 742-74 -228-2 737-6 859 2 268-1 857-72 -7 15 Operating income/loss -212 53-455 -614 392 Slide 24
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 2 717 196 1 23-993 4 3 155 2 916 195 847-1 835 2 123 7% -1% -31% 85% -1% -33% Expenses Claims and claim adjustment expenses; life and health benefits Return credited to policyholders Acquisition costs Other expenses expenses -2 128 431-544 -224-2 465-2 547 742-74 -228-2 737 2% 72% 29% 2% 11% Operating income/loss 69-614 Slide 25 1 27 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. 1 5-5 -1 84 Op. income Q3 27 Q2 vs. 1 5-5 -1 557 Op. income Q2 28-497 Investment result -322 Investment result 19-3 -338 Expenses Fees Technical result -1-371 -572 Realised inv. gains/losses -462-614 Op. income Q3 28-614 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
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 1 595-398 35 1 232-364 -67-6 -977-2 -329-331 1 229-1 334 29-76 5 12-2 816 68 2 264 Expenses Claims and claim adjustment expenses Acquisition costs Other operating costs expenses Operating income/loss 1 232-977 -331-76 2 264 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 1 826-29 41 1 577 1 229-1 334 29-76 -33% -29% Expenses Claims and claim adjustment expenses Acquisition costs Other operating costs expenses Operating income 1 577-76 Slide 28 1 27 numbers at 28 FX rates
Group items Q3 27 YTD 28 Revenues Net investment income Net realised investment gains/losses Other revenues Group items income 8-89 6-3 57 524 67 648-28% 173 923 9 1 186 Expenses Group function expenses Interest expenses Indirect and other taxes Other Interest and other expenses -118-517 -17-1 -662-135 -295-26 26-43 -14% -43% 53% -35% -289-995 -58-31 -1 373 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 2 52.5 57.7 End Q2 28 End Increase mainly due to shift from short-term investments into government bonds and CHF +1.7bn FX impact 35.5 31.8 End Q2 28 End Decrease due to sales and lower market values partially offset by CHF +2.1bn FX impact End Q2 28 13.6 1.6 2.1 126.9 38.9 39.9 End Q3 28 133.9 1.6 2.1 13.2 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
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 Q3 28 1 629 994 6 2 19 2 692 15 822 2 77 926 2 372 1 85 31 8 Percent of 5% 3% 2% 7% 8% 5% 9% 3% 7% 6% 1% Slide 31 AAA AA A BBB < BBB NR 1 489 3 432 11 84 1 788 4 382 625 31 8 Hedging notional 1-1 346-3 383-9 839-15 136-2 788-64 -32 556 Net total 143 49 1 245-4 348 1 594 561-756 1 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
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 12 399 12 399 94 94 12 493 Aaa 2 433 1 299 935 84 115 4 4 4 477 2 963 1 4 474 6 914 Aa-A 793 41 116 49 587 1 467 879 394 194 2 26 Below A 222 22 2 519 459 3 3 741 NR 67 67 67 MV 15 847 12 399 1 34 1 51 155 92 98 94 4 6 53 4 368 1 464 698 22 475 Est. % par 9 94 87 69 39 66 97 97 99 85 87 8 86 88 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 7 227 998 4 588 499 324 63 2 315 436 6 638 668 5 218 37 2 3 1 22 358 334 13 321 143 35 18 95 41 54 14 437 152 152 79 17 62 179 82 97 2 76 Below A NR 77 35 42 132 61 71 23 23 32 26 6 26 26 47 MV 8 32 5 122 387 2 793 7 438 5 586 23 1 649 423 423 689 13 676 254 78 176 3 149 151 17 46 Est. % par 9 9 96 89 96 96 1 93 99 99 82 1 82 68 7 67 93 89 98 92 Slide 34 Analysis of Structured CDS is excluded from tle ove and included on slide 39 As of 3 September 28
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. 71 2 257 Wrapped assets by wrapped rating (market values) AAA AA A BBB < BBB Sub-prime 115 91 496 2 Other 16 353 598 244 275 444 1 94 444 92 1 355 2 257 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 23 23 24 25 26 27 28 Market value by rating Aaa % of par Aa-A 554 98% 172 94% 188 96% 882 93% 1 466 9% 1 292 89% 33 9% 4 587 91% 5 1 1 25 148 31-499 % of par 89% 84% 79% 78% 85% 82% - 83% Below A - 2 9 11 11 4-35 % of par - 8% 77% 59% 82% 28% - 51% 559 176 26 917 1 625 1 66 33 5 122 % of par 98% 93% 94% 92% 89% 87% 9% 9% Slide 36 As of 3 September 28
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 2 47 431 686 3 587-1 97 2 49 Global Equity portfolio Listed Real Estate Strategic Holdings Sub- Hedging delta Net exposure Market values 25 168 578 771-412 359 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 2 484 3 588 2 861 8 933 Hedge Funds Private Equity Real Estate market value Market values 2 472 3 886 2 979 9 337 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
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 517 655 29 1 395 345 1 359 21 69 4 759 Par value % 11 14 4 29 7 29 4 2 1 Market value 366 158 851 77 33 169 25 1 949 Market value % of par value 71 76 61 22 22 81 36 41 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 8 6 5 4 3 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)
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 18 553 1% 14 384 78% 4 169 22% 979 23% 564 14% 496 12% 49 12% 366 9% 363 9% 147 4% 269 6% 495 12% 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 7 979 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 12 295 1 551 79 918 46 15 96 Slide 42 With-profit business Equities trading 1 626 Fixed income trading 2 53 Real estate 79 Cash & cash equivalents 13 with-profit business 4 599 Unit-linked and with-profit investments are included in assets designated as trading
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 5 211 5 282 4 8 514 15 15 3 546 Securities sold under agreement to repurchase Derivative instruments Securities sold short Securities in transit Other Financial Markets liilities Financial Markets liilities Other liilities 7 496 5 174 1 52 3 463 3 56 2 241 4 14 24 381 Reinsurance related assets 2 293 Other assets 4 3 1 139 Slide 43 Net investment income Q3 27 YTD 28 Fixed income 1 889 1 612-15% 5 383 Equities 39 16-59% 141 Other asset classes 659 69-9% 814 Investment expenses -157-216 -38% -553 Interest paid on cedant deposits -15-65 38% -262 Assets held for with-profit business 67 66-1% 24 Assets held for linked liilities 21 164-22% 585 Net investment income 2 62 1 646-37% 6 312 Running yield decreased to 4.5% in compared to Q3 27 5.4% Other assets impacted by lower income mainly from hedge funds and private equity Net investment income decreased in due to FX rates Slide 44
Net realised gains Fixed income Q3 27-752 -1 66-114% YTD 28-2 894 Equities 12-364 -886 FX M-T-M Q3 27-187 45-142 Q3 28 546-142 44 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 1 322-142 -933-142 497-167 -1 11 44 54% -18% -8% 1 176-616 -3 291 49 net realised investment gains -1 527-2 247-47% -6 12 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 -289-41 343 335-61 -94-173 477 497 Credit includes total derivative result relating to corporate bonds and structured products Slide 46
Impairments Government bonds Corporate bonds Structured products Wrapped assets Equities Other 118 1 78 12 38 Most of the impairments due to a drop in market value of more than 2% Slide 47 Net unrealised gains, pre-tax End Q2 28 967 End -1 485 114 75 Other Real estate Fixed income Equities 99 52-1 73 1 37 88 177 1 336-3 161 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
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 27 227.8 11.5 239.3-22. -6.6 21.7 14.2-8.4.4-26.2-3.8-6. 18.9 Where to find? 182.4 Balance sheet 16.2 Balance sheet 198.6 Slide 12-16. -4.6 178. 13.8-7.6 3.5-2.2-3.9-5. 158.6 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 1 654 23-142 at avg. FX 1 232-977 44-26% Adjustments 1-5 -1% Basis for RoI 1 71 659-61% YTD 28 at avg. FX 3 978-176 49 1 4 211 Average invested assets at avg. FX rates 2 175 667 164 833-6% 165 52 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
Return on equity calculation Net income Q3 27 1 469-34 YTD 28 884 Opening equity Closing equity Average equity 29 515 32 369 3 942 25 573 24 78 24 826 31 867 24 78 27 973 Time weighted capital movement Time weighted average equity 25 31 192-18 24 88-388 27 585 Return on equity, annualised 18.8% -4.9% 4.3% Slide 51 Shareholders equity 28 YTD in shareholders equity year-to-date 34 32 3 31 867 884-1 93 421-878 28-5 162 26 24-1 331 18 24 78 22 2 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)
Swiss Re s effective capital management Slide 53 Capital structure CHF bn 45 3 15 3.3 3.8 22.6 12.8% 11.% Senior long-term financial debt Hybrid capital Mandatory convertibles Shareholders' equity Hybrid to total capital Senior financial debt to total capital 2.2 3.5 16.7 15.5% 9.9% 1.4 3.4 18.5 14.4% 6.2% 1. 3.2 1. 19.2 13.1% 4.1%.7 3.1 2.1 24.4 1.8%.9 5.5 2.6 3.9 13.8%.8 7.3 1.6 31.9 17.5% 2.4% 2.3% 1.9%.3 6. 1.6 24.1 18.8%.9% 21 22 23 24 25 26 27 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 25 28 1 Shares reserved for ACI 26 29 1 Shares linked to employee participation plans (est.) Fully diluted number of shares 1 Assuming maximum number of shares for conversion 353.1 353.1-1.9-8.6-8.6-6. - 6. - 11.7 324.9 + 1.5 + 7.2 + 4.7 36.9
Exchange rates Geographic gross premiums written split by main currencies Other 17% Average rates Q3 27 Q2 28 Q3 27 / Q2 28 / USD/CHF 1.22 1.5 1.6-13.11% +.95% EUR/CHF 1.64 1.61 1.61-1.83% -.% GBP/CHF 2.42 2.8 2.6-14.88% -.96% CAD/CHF 1.1 1.5 1.4-5.45% -.95% CAD 4% GBP 1% EUR 25% USD 44% Closing rates Q3 27 Q2 28 Q3 27 / Q2 28 / USD/CHF 1.17 1.2 1.12-4.27% +9.8% EUR/CHF 1.66 1.6 1.57-5.42% -1.88% GBP/CHF 2.38 2.3 2. -15.97% -1.48% CAD/CHF 1.18 1. 1.5-11.2% +5.% Slide 55 Corporate calendar & contacts Corporate calendar 19 February 29 Annual results 28 17 April 29 145th Annual General Meeting (Zurich) Investor Relations contact Hotline E-mail +41 43 285 4444 Investor_Relations@swissre.com Slide 56 Susan Holliday Ross Walker Chris Menth +44 2 7933 389 +41 43 285 2243 +41 43 285 3878 Marc Hermacher Simone Lieberherr +41 43 285 2637 +41 43 285 419
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