For a resilient future 2016 Financial Report Financial highlights Our Group delivered a good net income of USD 3.6 billion, supported by all Business Units. Financial highlights For the years ended 31 December USD millions, unless otherwise stated 2015 2016 Change in % Group Net income attributable to common shareholders 4 597 3 5 5 8 –23 Premiums earned and fee income 30 214 33 231 10 Earnings per share in CHF 12.93 10.55 –18 Common shareholders’ equity 32 415 3 4 5 3 2 7 Return on equity in %1 13.7 10.6 Return on investments in % 3.5 3.4 Net operating margin in %2 17.1 13.0 Number of employees3 12 767 14 0 5 3 10 Property & Casualty Reinsurance Net income attributable to common shareholders4 3 0 08 2 10 0 –30 Premiums earned 15 090 17 0 0 8 13 Combined ratio in %2,4 85.7 93.5 Net operating margin in %2,4 22.5 15.4 Return on equity in %1,4 22.4 16.4 Life & Health Reinsurance Net income attributable to common shareholders4,5 968 807 –17 Premiums earned and fee income5 10 616 11 5 2 7 9 Net operating margin in %2,4,5 12.2 10.4 Return on equity in %1,4,5 16.2 12.8 Corporate Solutions Net income attributable to common shareholders4 357 135 –62 Premiums earned 3 379 3 5 0 3 4 Combined ratio in %4 93.2 101.1 Net operating margin in %4 14.1 4.2 Return on equity in %1,4 15.5 6.0 Life Capital Net income attributable to common shareholders4,5 424 638 50 Premiums earned and fee income5 1 129 1 19 3 6 Gross cash generation6 543 721 33 Net operating margin in %4,5 17.8 27.0 Return on equity in %1,4,5 7.5 10.4 1 Return on equity is calculated by dividing net income attributable to common shareholders by average common shareholders’ equity. 2 Letter of credit fees of USD 55 million in 2015, thereof USD 45 million in Life & Health Reinsurance and USD 10 million in Property & Casualty Reinsurance, have been reclassified from “Operating expenses” to ”Interest expenses”. 3 Regular staff. 4 The Group’s new internal service cost framework resulted in a reallocation of operating expenses to Group items from the business segments. Comparative information for 2015 has been adjusted accordingly. 5 As of 1 January 2016, the primary life and health insurance business (individual and group) is reported in the Life Capital segment instead of the Life & Health Reinsurance segment. Comparative information for 2015 has been adjusted accordingly. 6 Gross cash generation is the change in excess capital available over and above the target capital position, with the target capital being the minimum statutory capital plus the additional capital required by Life Capital’s capital management policy. In this report We provide a detailed record of our financial and operational performance for 2016. CONTENTS The year in review Corporate governance Compensation Business Units at a glance 2 Overview 82 Report from the Message from the Chairman 4 Group structure and shareholders 86 Compensation Committee 138 A conversation with the Group CEO 8 Capital structure 89 Compensation context Our business model 12 Board of Directors 92 and highlights in 2016 140 Executive management 108 Compensation framework 143 Financial year Shareholders’ participation rights 114 Compensation governance 150 Compensation disclosure The global economy and Changes of control and shareholdings 2016 154 financial markets 16 and defence measures 115 Report of the statutory auditor 161 Group strategy 24 Auditors 116 Group results 26 Information policy 118 Financial statements Group underwriting 28 Group investments 30 Corporate responsibility Group financial statements 164 Summary of financial statements 34 O v e r v i e w 122 Notes to the Group Reinsurance 36 Natural catastrophes financial statements 172 Property & Casualty Reinsurance 38 and climate change 124 Report of the statutory auditor 276 Life & Health Reinsurance 40 Strengthening risk resilience: Group financial years 2007–2016 280 Corporate Solutions 42 highlights in 2016 128 Swiss Re Ltd 282 Life Capital 46 Our sustainability risk framework 131 General information Share performance 50 Diversity and inclusion in our workforce 134 Glossary 300 Risk and capital management Cautionary note on forward-looking statements 306 O v e r v i e w 54 Note on risk factors 308 Capital management 56 Contacts 316 Economic Value Management 59 Corporate calendar 317 Liquidity management 61 Risk management 63 Risk assessment 69 More information online: reports.swissre.com SWISS RE AT A GLANCE Business Units at a glance Working across diversified insurance risks and businesses to maximise shareholder value. BUSINESS NET PREMIUMS EARNED NET OPERATING RETURN ON UNIT AND FEE INCOME (USD billions) INCOME (USD millions) PERFORMANCE EQUITY Reinsurance Proper ty & Casualty Reinsurance is Swiss Re’s largest business in terms of income, providing 2016 17.0 2016 2 100 9 3 . 5 % 1 6 . 4 % 86% of net premiums and fee income 2015 15.1 2015 3008 (85.7% 2015) (Target: 10%–15%) through two segments — Combined ratio Property & Casualty and Life & Health. 2016 17,0 Reinsurance aims to extend Life & Health Swiss Re’s industry-leading position 2015 15,1 with disciplined underwriting, prudent 2016 11.5 2016 807 portfolio management and diligent 10.4% 1 2 . 8 % 10.6 2015 968 client service. 2015 (12.2% 2015) (Target: 10%–12%) Net operating margin 2016 11,5 Corporate Solutions 2015 10,6 Corporate Solutions serves mid-sized 2016 3.5 2016 135 and large corporations, with product 2015 3.4 2015 357 101.1% 6 . 0 % offerings ranging from traditional (93.2% 2015) (Target: 10%–15%) property and casualty insurance to 2016 3,5 Combined ratio highly customised solutions. 2015 3,4 Corporate Solutions serves customers from more than 50 offices worldwide. Life Capital Life Capital manages closed and open 2016 1.2 2016 638 life and health insurance books. The 2015 1.1 2015 424 721m 1 0 . 4 % Business Unit provides alternative (USD 543m 2015) (Target: 6%–8%) access to the life and health risk pool, 2016 1,2 Gross cash generation helping to generate stable returns and seize attractive new opportunities. 2015 1,1 For our clients and partners, it provides a primary insurance balance sheet, efficient policy administration services, life and health expertise and know- ledge for reaching more markets and offering new products. Total (After consolidation) 2016 33.2 2016 3 558 2015 30.2 2015 4597 1 0 . 6 % +70 0 (13.7% 2015) At least 700 basis points greater than Return on equity Swiss Re’s designated risk-free rate, 2016 33,2 currently ten-year US government bonds. 2015 30,2 2 Swiss Re 2016 Financial Report BUSINESS NET PREMIUMS EARNED NET OPERATING RETURN ON Diversified and global UNIT AND FEE INCOME (USD billions) INCOME (USD millions) PERFORMANCE EQUITY Net premiums earned and Reinsurance Proper ty & Casualty fee income by business segment Reinsurance is Swiss Re’s largest (Total USD 33.2 billion) business in terms of income, providing 9 3 . 5 % 1 6 . 4 % 86% of net premiums and fee income (85.7% 2015) (Target: 10%–15%) 51% P&C Reinsurance through two segments — Combined ratio 35% L&H Reinsurance Property & Casualty and Life & Health. 10% Corporate Solutions Reinsurance aims to extend Life & Health % 4 Life Capital Swiss Re’s industry-leading position with disciplined underwriting, prudent portfolio management and diligent 10.4% 1 2 . 8 % client service. (12.2% 2015) (Target: 10%–12%) Net operating margin Corporate Solutions Corporate Solutions serves mid-sized and large corporations, with product 101.1% 6 . 0 % offerings ranging from traditional (93.2% 2015) (Target: 10%–15%) property and casualty insurance to Combined ratio Net premiums earned highly customised solutions. and fee income by region Corporate Solutions serves customers (Total USD 33.2 billion) from more than 50 offices worldwide. 33% EMEA Life Capital 45% Americas Life Capital manages closed and open 22% Asia-Pacific life and health insurance books. The 721m 1 0 . 4 % Business Unit provides alternative (USD 543m 2015) (Target: 6%–8%) access to the life and health risk pool, Gross cash generation helping to generate stable returns and seize attractive new opportunities. For our clients and partners, it provides a primary insurance balance sheet, efficient policy administration services, life and health expertise and know- ledge for reaching more markets and offering new products. Total (After consolidation) 1 0 . 6 % +70 0 (13.7% 2015) At least 700 basis points greater than Return on equity Swiss Re’s designated risk-free rate, currently ten-year US government bonds. Swiss Re 2016 Financial Report 3 MESSAGE FROM THE CHAIRMAN Message from the Chairman Swiss Re can thrive — also in turbulent times. Dear shareholders, 2016 was a year of profound changes. However, despite many difficulties, Swiss Re was able to stay on course and deliver good results. In brief: Property & Casualty Reinsurance and Life & Health Reinsurance have continued to generate sound returns. Our direct insurance unit Corporate Solutions faced a very difficult market environment, which is reflected in the results. Meanwhile, our newest Business Unit, Life Capital, which is still in development, had great success in integrating the acquired Guardian Financial Services portfolio in 2016. Strategic challenges — in turbulent times In the summer of 2016, as in every other year, I discussed the main strategic challenges of the coming years with our global top management, presenting to “ In the course of our 153 years them both the viewpoint of the Board of Directors and my personal assessment.