Goldman Sachs 18 th Annual European Financials Conference Edouard Schmid, Head Property & Specialty Reinsurance Madrid, 10 June 2014
Agenda Introduction to Swiss Re Differentiation through knowledge Protection gaps and High Growth Markets Outlook and Q&A 2 2
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 This track record provides Swiss Re with preferential access to long tail business, such as Casualty Swiss Re has paid a dividend every year since 1869 (date of first listing) 1 S&P: AA-, stable outlook; Moody's: Aa3, stable outlook; AM Best A+, stable outlook. Ratings as at 31 May 2014 Swiss Re's charter of foundation, 1863 3
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 Strategic goal To be a focused, lean, global player in large commercial business Strategic goal To be a recognised force in the closed life book market Current position The foundation of our strengths Current position A key opportunity for growth Current position Providing cash dividends 4
Swiss Re is broadly diversified by geography and product line Net premiums earned 1 2013 (USD 28.8 bn) by region (in USD bn) and by business segment: 11.5 11.3 6.0 Corporate Solutions 10% Admin Re 5% Americas 40% Europe Asia (incl. Middle East /Africa) 39% 21% L&H Re 35% P&C Re 50% 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 5
Agenda Introduction to Swiss Re Differentiation through knowledge Protection gaps and High Growth Markets Outlook and Q&A 6 6
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 7
Differentiation through access and solutions Swiss Re underwrites P&C business both directly with clients and via brokers (split approximately 50/50) Expected economic profit by source Globals division, January 2014 renewals Our client centric focus has strengthened relationships throughout our clients. The depth and breadth of our relationships allows targeted solutions for clients and assists with knowledge transfer and product development 42% 58% Unique transactions: Large Deals & Customized Solutions Swiss Re often achieves differentiated terms and conditions Open market: Market Placement Customized solutions deliver exactly what clients need and produce higher margins for Swiss Re 8
Swiss Re's strength in underwriting P&C premium and underwriting profit comparison 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 2013 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/Alleghany Source: Swiss Re Economic Research and Consulting 9
P&C Reinsurance: 2014 renewals Overall price quality remains at an attractive level January 2014 treaty renewals 1-2% USD 9.8bn USD 9.6bn YTD 2014 renewals (January April) Treaty portfolio volume Up for renewal 1 Jan 2014 Estimated outcome USD 11.2bn USD 11.2bn April 2014 treaty renewals +14% USD 1.4bn USD 1.6bn Up for renewal YTD 2014 Estimated outcome Up for renewal 1 April 2014 Estimated outcome Successful April renewals in a challenging environment; wrote attractive new Casualty business in the US YTD risk adjusted price quality 2 remains at 107% 1 January 2014 numbers have been restated with current fx rates 2 Swiss Re's risk adjusted price quality provides an economic view on price quality, ie includes rate and exposure changes, claims inflation and interest rates 10
P&C Reinsurance: 2014 renewals Portfolio weighting by line of business and region Gross premium volume, treaty portfolio Up for renewal YTD April Estimated outcome YTD April By line of business 13% 34% 25% 28% 19% 13% 25% 43% Casualty Nat Cat Property Specialty 1 1 By region 29% 26% 45% 32% 46% EMEA Americas Asia 22% Continue to allocate capital to lines with the most favourable risk adjusted returns Property Cat rates softening significantly for all markets (Swiss Re wrote less nat cat business, but still at attractive levels) Casualty book is further growing at profitable terms in all three regions High Growth Markets volume stable with slightly improved risk adjusted price quality 1 Excluding nat cat 11
Agenda Introduction to Swiss Re Differentiation through knowledge Protection gaps and High Growth Markets Outlook and Q&A 12 12
Large protection gap Insured vs total natural catastrophe losses world-wide Catastrophe related losses 450 400 350 300 250 200 150 100 50 0 in USD billion, at 2013 prices 2005 2006 2007 2008 2009 2010 2011 2012 2013E 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Insured losses Uninsured losses Uninsured losses % of total losses Note: Insured losses plus uninsured losses = total or economic losses Source: Swiss Re's sigma catastrophe database 13 13
Demand for natural catastrophe capacity will continue to increase Increase in largest industry loss scenarios per region 2012 vs. 2020E EQ: Earthquake (500 yrs) TC/WS: Tropical Cyclones/Winter Storms (100 yrs); TC includes storm surge FL: River Flood (250 yrs) Demand for nat cat insurance expected to increase on average by approx. 50% in mature markets and 100% in HGM by 2020 14 14
Stabilising growth in non-life insurance Emerging Markets with strongest growth rates 25% 20% 15% 10% 5% 0% Real premium growth rate for non-life insurance by region, 2010 to 2015F Non-life premium growth is expected to remain stable at around 8% in 2014 emerging Asia will maintain stable strong growth at above 10% the absence of one-off factors (eg multi-year contracts) will drag on the growth of Latin America CEE is expecting a slow recovery -5% Emerging Asia Middle East and North Africa Latin America Central and Eastern Europe Sub-Saharan Africa Advanced markets 2010 2011 2012 2013E 2014F 2015F Source: Swiss Re Economic Research & Consulting 15
Large mortality protection gap Definition Protection needed Income to maintain living standard Mortality protection gap Net financial assets / savings Relevant life insurance Protection in place Source: Swiss Re the difference between the protection needed and the protection in-place to maintain dependents living standards following the death of the primary breadwinner 16
Stabilising growth in life insurance Emerging Markets with strongest growth rates 20% 15% 10% 5% Real premium growth rate for life insurance by region, 2010 to 2015F Real growth of life insurance premiums in emerging markets is expected to accelerate to 8.5% in 2014 from 6.2% in 2013, supported by a further recovery of China and India 0% -5% sustained strong performance of most Latin American markets -10% -15% Emerging Asia Middle East and North Africa Latin America Central and Eastern Europe Sub-Saharan Africa Advanced markets an expected rebound in CEE Sustained low interest rates will continue to drag on profitability 2010 2011 2012 2013E 2014F 2015F Source: Swiss Re Economic Research & Consulting 17
Actions for profitable growth in the HGMs Dedicated strategies across all lines of business HGM initiatives Reinsurance: organic growth, partnerships e.g. with local market reinsurers Corporate Solutions: organic growth, new offices, acquisitions Lines of business with particular HGM angle: Nat Cat Agro Infrastructure Health and medical Solvency relief Direct investments, e.g. into HGM (re)insurers Stronger diversity of employee base 2012 HGMs 15% of Swiss Re Group premiums 1, ~11% of profits 2 2015E HGMs 20-25% of Swiss Re Group premiums 1 2020E (re)insurance market opportunity: Estimated premium pool of USD >100bn in reinsurance and USD ~2,000bn in primary insurance 1 Gross earned premiums for the Swiss Re Group across all business units 2 Pre-tax profits after cost of capital 18
Agenda Introduction to Swiss Re Differentiation through knowledge Protection gaps and High Growth Markets Outlook and Q&A 19 19
Priorities for 2014 Focus on strategy execution Group strategy Maintain industry leading underwriting track record Productivity emphasis to control management expenses Continue to re-direct capital and talent to High Growth Markets Outperform our peers in P&C P&C Re: strict focus on risk selection and portfolio management; differentiate through knowledge, expertise and services Corporate Solutions: deliver on our commitment of continuing profitable growth, with particular focus on High Growth Markets Perform in L&H L&H Re: deliver on fixing pre-2004 US issues, grow new business, demonstrate progress towards 2015 ROE target of 10-12% Admin Re : continue operational transformation, selective UK growth to enhance UK franchise Performance and capital management Keep growing regular dividends and profitable business Redeploy additional USD 3bn of excess capital @11% ROE by 2015 2011-15 financial targets remain our top priority 20
Group financial targets On track ROE 700 bps above risk free average over 5 years (2011-2015) EPS growth 10% average annual growth rate, adjusted for special dividends 1 ENW per share growth plus dividends 10% avg. annual growth rate over 5 years in % 9.2 9.6 8.5 14.9 13.4 13.7 7.8 8.2 8.6 in USD 2 7.7 6.6 7.3 11.9 8.0 13.0 8.4 3.6 9.7 in USD 2 89.7 87.8 98.7 105.2 108.5 123.1 119.4 144.5 2.2 3 3 2010 2011 2012 2013 Q1 2014 = reported ROE = 700 bps above US Gov 5 years avg. 2011-2015E 2010 2011 2012 2013 Q1 2014 = reported EPS 2015E = EPS @10% avg. annual growth (base: 2010), adjusted for special dividends 1 2010 2011 2012 2013 2015E = reported ENWPS including cumulative dividends in USD 4 = ENWPS @ 10% avg. annual growth (base: 2010) Delivering the 2011-2015 financial targets remains Swiss Re's top priority 1 EPS CAGR of 10% has been adjusted to 5% for 2014 to account for the distribution of excess capital through the special dividend of USD 1.6bn in April 2014. Methodology is in line with the approach taken for the special dividend of USD 1.5bn paid in April 2013 2 Assumes constant foreign exchange rate 3 Excl. CPCI 4 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 (CHF 3.00, or USD 3.3, in addition to the 2011 dividend), 2013: USD 14.5 (CHF 7.50, or USD 8.05, in addition to the 2011 and 2012 dividends) 21
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Corporate calendar & contacts Corporate calendar 3 July 2014 Investors' Day London 6 August 2014 Second Quarter 2014 results Conference call 7 November 2014 Third Quarter 2014 results Conference call 19 February 2015 Annual 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; 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