Into the eye of the future Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012
Today's agenda Setting the stage: Challenging environment On stage: What this means for the insurance industry Backstage: Looking into the future Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 2
Setting the stage: Challenging environment Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 3
Challenging environment not just for insurers regulatory environment changing risk landscape weak growth Insurance Industry low interest rates, inflation, price pressure financial markets, sovereign debt shrinking client loyalty mature markets, high growth markets Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 4
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 US Federal Fund Target Policy Rate Bank of England Policy Rate European Policy Rate Index (Composite*) Source: Bloomberg data as of 20 March 2012 * Including German Repo Rate until 31.12.1998 and ECB Refinancing Rate from that date onwards Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 5
How do low interest rates affect non-life insurance? ROE Based on US industry data for 2011 14% 12% 10% Investment yield 8% 6% 4% 2% 0% 5.1% 4.1% 3.1% 95% 97% 99% 101% 103% 105% 107% Combined ratio Source: Swiss Re Economic Research & Consulting Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012
Slowdown of economic growth 10% Real GDP growth 8% 6% 4% 2% 0% 2005 2006 2007 2008 2009 2010 2011-2% -4% Advanced markets Emerging markets World Source: Economic Research & Consulting Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 7
2011: Annus horribilis in terms of natural catastrophes Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 8
The insurance and financial services industry has entered a new phase in terms of regulatory reforms Speed and number of reforms is alarming The insurance sector has limited time to engage and assess the impact of the regulatory reforms Many regulators and policymakers are also overwhelmed The regulatory clock is ticking... Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 9
On stage: What this means for the insurance industry Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 10
Premium growth was only negative twice before the financial crisis of 2008 25% 20% Real growth rates 1973: Oil crisis 1980: Global recession 2008: Great recession & after 15% 10% 5% 0% -5% -10% 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Economic Research & Consulting Total Non-life Life Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 11
Economic recovery, interest rates and regulatory developments impact profitability 20 Profitability of global non-life insurance industry (% of premiums, shareholder capital) 15 10 5 0? -5-10 -15 1999 2001 2003 2005 2007 2009 2011 2013 2015 Underwriting result Investment result Operating result ROE after tax Source: Economic Research & Consulting; Aggregation based on eight major insurance markets Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 12
Backstage: Looking into the future Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 13
Insurance penetration remains low huge potential Natural catastrophe losses 1980-2011* in USD bn % of people claiming to be financially "well positioned" in event of suffering a long-term illness or disability, or death 300 250 Economic Loss Insured Loss 200 150 100 50 0 80 85 90 95 00 05 10 Note: Loss amounts indexed to 2010 Source: Swiss Re sigma catastrophe database Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 14
Risk landscape is changing Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 15
Smart expansion Productoriented Clientoriented Relevant to society Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 16
The re/insurance industry absorbs shocks 2001: World Trade Centre 47% of the total losses were paid by insurance sector. Reinsurers assumed 50%~60% of insured losses 1. 2005: Hurricane Katrina, Rita and Wilma 50% of the total losses were paid by the insurance sector. Reinsurers assumed 35% of insured losses 2010: Earthquake in Chile 27% of the total losses were paid by the insurance sector. Reinsurers assumed 95% of insured losses 2011: Earthquake in New Zealand 80% of the total losses were paid by the insurance sector. Reinsurers assumed 70% of insured losses 2011: Earthquake in Japan 17% of the total losses were paid by the insurance sector. Reinsurers assumed 40% of insured losses 1 Based on Holborn, 2009 catastrophe losses Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 17
and provides capital for the real economy Year-end 2011, USD trillion Pension funds Insurance companies Mutual funds Sovereign wealth funds Private equity Hedge funds 0 10 20 30 40 30.9 25.0 23.8 4.8 2.6 2.0 Sources: Pension funds CityUK; Insurers Swiss Re Economic Research & Consulting; Mutual funds Investment Company Institute; Sovereign wealth funds Sovereign Wealth Funds Institute; Private equity Deutsche Bank; Hedge funds Hedge Fund Research, Inc. Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 18
Re/insurers absorb shocks, provide capital for the real economy and support risk prevention this becomes ever more important in a challenging environment Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012 19
Thank you
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