Helvea Swiss Equities Conference Guido Fuerer, Group Chief Investment Officer 16 January 2014
Introduction to Swiss Re 2
Swiss Re Group Overview Swiss Re Group Reinsurance Corporate Solutions Admin Re P&C L&H Strategic goal To be the world's leading reinsurer Current position The foundation of our strengths Strategic goal To be a focused, lean, global player in large commercial business Current position A key opportunity for growth Strategic goal To be a recognised force in the closed life book market Current position Providing cash dividends 3
Swiss Re is broadly diversified by geography and product line Net premiums earned 1 2012 (USD 25.5 bn) by region (in USD bn) and by business segment: 9.6 10.7 5.2 Corporate Solutions 8% Admin Re 8% Americas Europe Asia 38% (incl. Middle East /Africa) 42% 20% L&H Re 35% P&C Re 49% Swiss Re benefits from geographic and business mix diversification and has the ability to reallocate capital to achieve profitable growth 1 Includes fee income from policyholders 4
High Growth Markets Tangible growth opportunities exist Agriculture Nat Cat Infrastructure Life Health 5
Priorities for the Swiss Re Group Group strategy Address low returns in L&H Capital and asset management Outperform our peers in P&C 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 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 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 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 6
Differentiation through knowledge 7
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 Swiss Re has a history of long term investments, going back to the financing of railways at the end of the 19 th century 1 S&P: AA-, stable outlook; Moody's: Aa3, stable outlook; AM Best A+, stable outlook. Ratings as at 10 January 2014 Swiss Re's charter of foundation, 1863 8
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 9
Cornerstones of Swiss Re's underwriting R&D as a key differentiator Portfolio steering Cycle management R&D Structuring skills Risk selection Portfolio steering R&D is a value driver in underwriting Property Own research team and models for storm, earthquake and flood Ability to compare to commercial tools and understand differences Casualty Forward-looking "Nat-Cat-like" model being developed, based on systematic assessment of risk drivers Life & Health Unparalleled mortality experience data provides ability to better quantify the underlying risk Reinsurance is a knowledge business R&D provides a competitive advantage 10
Swiss Re's strength in underwriting Outperformance, and growth at the right time Swiss Re s P&C premium and underwriting profit share vs top reinsurers 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010 2011 2012 1H13 Premiums U/W profit (red = loss) Average share of profit is well above share of premium Underwriting loss for the industry in 2011; Swiss Re's share of loss lower than our share of premium Underwriting profit = GAAP premiums earned - claims and claims adjustment expenses - acquisition costs - other expenses Top 8 reinsurers include: Swiss Re, Munich Re, Hannover Re, PartnerRe, SCOR, General Re, Everest Re, Transatlantic Re Source: Swiss Re Economic Research and Consulting 11
Group financial targets Well on track ROE 700 bps above risk free average over 5 years (2011-2015) in % 9.2 9.6 8.5 13.4 13.6 7.8 8.1 EPS growth 10% average annual growth rate, adjusted for special dividends 1 in USD 2 6.6 7.7 7.3 11.9 8.0 8.4 9.4 10.1 ENW per share growth plus dividends 10% avg. annual growth rate over 5 years in USD 2 98.7 89.7 87.8 108.5 119.4 105.3 110.0 144.5 3 2010 2011 2012 9M 2013 = reported ROE = 700 bps above US Gov 5 years avg. 2011-2015E 3 2010 2011 2012 9M 2013 2015E = reported EPS = EPS @10% avg. annual growth (base: 2010), adjusted for special dividends 1 2010 2011 2012 30 June 2015E 2013 = reported ENWPS including cumulative dividends in USD 5 = ENWPS @ 10% avg. annual growth (base: 2010) 4 4 Delivering the 2011-2015 financial targets remains Swiss Re's top priority 1 EPS CAGR of 10% has been adjusted to 5% for 2013 to account for the distribution of excess capital through the special dividend of USD 1.5bn in April 2013. Special dividend assumed to be fully reinvested and thus comparable to excess capital re-deployment via share buyback at a share price of approx. CHF 70 2 Assumes constant foreign exchange rate 3 Excl. CPCI 4 Targets shown are for full year 2013 5 Cumulative dividends included in ENW per share were translated from CHF to USD using the fx rate of the dividend payment date; dividends included for 2011: USD 3.1 (CHF 2.75), 2012: USD 6.4 (additional CHF 3.0 or USD 3.3 on top of the 2011 dividend), 2013: USD 14.5 (additional CHF 7.5 or USD 8.1 on top of previous years' dividends) 12
Swiss Re's asset management 13
Introduction The Asset Management function is responsible for managing both the Group's and the Business Units' (BUs) investments A top-down group-wide investment strategy is consistently applied across the BUs ALM remains the cornerstone of the investment process The BUs' Asset Liability Management (ALM) characteristics and objectives are reflected in the BUs' strategic asset allocations (SAAs) Integrated risk allocation principles are used to allocate capital and manage risk Asset Management provides the Group and the BUs with customised investment management services and provides attractive long term investment returns in accordance with the allocated risk capacity 14
Historically low interest-rate environment Central banks' policy rates (in %) 25 1980s U.S. Savings and Loan crisis 1990s U.S. Savings and Loan crisis July 1997 Asian financial crisis 2000 Dot.com bubble 2008 Economic and financial crisis 20 15 10 5 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 US Federal Fund Target Policy Rate European Policy Rate Index Bank of England Policy Rate * German discount rate until 31 December 1998 and ECB Refinancing Rate from that date onwards Source: Datastream data as of 31 December 2013 15
Rebalancing of investment portfolio Purpose: move the asset allocation closer to peers and mid-term plan, while remaining balanced overall Market outlook: moderate growth favours credit allocation Expected impact: increased investment income and potential for capital appreciation compared to starting point Portfolio Actions: increase allocation in high quality credit and equity and establishment of short duration position Implementation period: largely completed by Q3 2013 16
Integrated investment process at Group and BU levels Top-down investment view Business considerations Capital/liquidity considerations Group SAA / BU SAAs Investment views and market scenarios Determine preferred investment universe Business Units' characteristics, objectives and considerations Risk parameterisation and modeling Internal and external capital and liquidity requirements Detailed analysis of the current portfolio Target metrics applied BU SAAs tailored to their needs and objectives Group and BU SAAs consistent with top-down investment strategy and capital and liquidity capacity 17
Investment governance Group level Business Units level Group BoD EC approves Group strategic asset allocation (SAA) Asset Management consolidates Group SAA reflecting Business Units' SAA Reinsurance Corporate Solutions Admin Re Investment governance at Group consistent BUs' considerations and needs reflected in investment governance structure Consistency of investment strategy between Group and BUs fully ensured SAA approved by governing Boards 18
Investment mix Re-balancing largely complete P&C Reinsurance L&H Reinsurance Corporate Solutions Admin Re Swiss Re Group 100% 90% 0-5% 3% 0-5% 1% 0-5% 3% 0-5% 15% 5-15% 13% 5-15% 1% 0-5% 1% 0-5% 0-5% 10% 5-10% 80% 70% 60% 16% 5% 10-20% 31% 20-40% 25% 0-10% 7% 5-15% 6% 15-30% 5-10% 54% 45-55% 28% 5% 20-30% 5-10% 50% 40% 30% 20% 10% 0% 31% 33% End Q3 2013 40-50% 39% 10-25% 17% Mid-term plan End Q3 2013 30-50% 5-15% Mid-term plan 29% 26% End Q3 2013 35-55% 3% 32% 5-15% 10% Mid-term plan End Q3 2013 0-10% 35-50% 0-5% Mid-term plan 33% 23% End Q3 2013 35-55% 10-20% Mid-term plan Cash, cash equivalents and short-term investments Securitised products Equities and alternatives Government bonds (incl. agency) Corporate bonds (incl. loans, municipals and credit ETFs) Other (incl. derivatives) 19
Investment strategy going forward: What is out there? Macro Risks Policy errors Change in demographics, source of multiple implications Financial repression Deleveraging in public and private sectors Deterioration of the re-intermediation role of long term investors % Pressure on investment returns Low policy-rate environment, spill over effects to be considered Need for long duration assets to support economic growth Regulatory Reforms Broad, ambitious and needed changes, but number and speed is overwhelming; full implications are unclear Long-term market uncertainties remain high, requiring a prudent investment strategy together with agile and efficient investment operations 20
Summary Flexible and transparent investment strategy and process Matching liabilities at Group and BU level with corresponding assets based on economic view and within defined limits and controls Controlled and structured investment decisions at all levels Fully in line with Group's overall risk tolerance and capital utilisation and now also reflecting BUs' individual risk limits and capital allocations Enhanced transparency of investment governance Largely unchanged for Group and for in-house/outsourced mandates, as well as tailored SAAs to individual BUs' characteristics and objectives Asset rebalancing largely completed by Q3 2013, tactical short duration position established in mid-2013 21
Q&A 22
Corporate calendar & contacts Corporate calendar 20 February 2014 Annual Results 2013 Conference call 18 March 2014 Publication of Annual Report 2013 and EVM 2013 24 March 2014 Annual General Meeting (AGM) Briefing Conference call 11 April 2014 150th Annual General Meeting Zurich 7 May 2014 First Quarter 2014 results Conference call 6 August 2014 Second Quarter 2014 results Conference call Investor Relations contacts Hotline E-mail +41 43 285 4444 Investor_Relations@swissre.com Eric Schuh Ross Walker Chris Menth +41 43 285 4708 +41 43 285 2243 +41 43 285 3878 Simone Lieberherr Simone Fessler +41 43 285 4190 +41 43 285 7299 23
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. 24