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Reinsurance (Pdf) Reinsurance Christian Mumenthaler CEO Reinsurance Swiss Re’s largest Business Unit delivers strong results 1 Economic Net Worth • Wholesale reinsurance leader offering products and related services L&H in property and casualty, as well as in life and health 31% • Foundation of Swiss Re Group’s strength 49% P&C • Strong performance over the last years and YTD Combined ratio and operating margin Return on Equity in % in % 80.7 83.8 83.7 84.8 26.7 26.0 26.7 23.3 17.0 8.9 6.4 10.7 8.6 5.8 2.6 -7.9 FY 12 FY 13 FY 14 9M 15 FY 12 FY 13 FY 14 9M 15 P&C: Combined ratio L&H: Operating margin P&C L&H 1 Share of Swiss Re Group’s Economic Net Worth deployed across Business Units (excl. Group Items), 30 June 2015 Investors' Day | Rüschlikon, 8 December 2015 84 Reinsurance – Agenda I systematically allocate capital to risk pools / revenue streams II III broaden optimise and diversify client resources and base to increase platforms to support access to risk capital allocation IV emphasise differentiation Investors' Day | Rüschlikon, 8 December 2015 85 I II III IV Since 2006 we have a Group-wide process for business steering and underwriting which is successfully applied in Reinsurance Swiss Re - Steering Framework Key success factors: •1 Integrated economic framework to steer both P&C and L&H Reinsurance businesses, including planning, pricing 4 Learning Strategy and reserving •2 Active portfolio steering between and 2 within P&C and L&H Reinsurance Portfolio- 1 EVM Capital businesses & perform- allocation ance & •3 Separation of pricing and costing to measure- Target ment setting enable transparent decision making •4 Feedback loop allows to optimise costing 3 Decision making Investors' Day | Rüschlikon, 8 December 2015 86 I II III IV We shifted the portfolios in line with our underwriting framework and growth strategy P&C Reinsurance portfolio composition1 L&H Reinsurance portfolio composition1 US GAAP Gross Earned Premiums US GAAP Gross Earned Premiums 7% 7% 7% 7% 8% 9% 14% 15% 15% 18% 20% 21% 4% 19% 20% 23% 11% 12% 25% 28% 9% 9% 31% 14% 10% 9% 11% 10% 17% 8% 11% 11% 13% 14% 15% 15% 13% 17% 10% 9% 10% 10% 74% 73% 17% 70% 67% 18% 18% 17% 64% 60% 15% 15% 22% 24% 22% 22% 19% 16% 2010 2011 2012 2013 2014 9M 2015 2010 2011 2012 2013 2014 9M 2015 HGM (excl. Motor China) Casualty (excl. Motor) Property Non-Prop HGM (Motor China only) Specialty HGM Health Life Motor Property Prop / Fac • P&C: High Growth Markets driver for growth; reduction of Property since 2013 due to price developments • L&H: continuous growth of Health and business in High Growth Markets 1 Data before external retro and other items; average Q3 2015 FX rates used for all years; Line of business split does not include High Growth Markets business Investors' Day | Rüschlikon, 8 December 2015 87 I II III IV Transactions become increasingly important Development of transactions1 • EVM underwriting profit substantially increased over the EVM underwriting profit in USD bn All figures as priced past 5 years 0,8 • Increasing solvency and capital standards support transactions, especially L&H Reinsurance 0,6 deals • We benefit from trend towards +27% 49% large and tailored transactions 0,4 47% 57% 12% 51% 0,2 20% 51% 88% 53% 49% 43% 80% 0,0 2010 2011 2012 2013 2014 9M 2015 L&H P&C 1 Data before external retro and other items, FX not restated; Transactions include structured deals and large transactions Investors' Day | Rüschlikon, 8 December 2015 88 I II III IV P&C – Swiss Re has been consistently outperforming the market with regards to profitability Market share of top 7 reinsurers Swiss Re P&C Reinsurance revenues and operating income2 share vs other reinsurers 40% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 9M 2015 Revenues1 Operating income2 • Average revenue share of 21% In 2011, the industry experienced extraordinary high natural catastrophe losses. Swiss Re was hit to a • Average profit share of 30% lesser extent than peers. 1 Revenues exclude net realised investment gains 2 Operating income is income before tax and before interest for financial debt, excluding net realised investment gains (losses) Top 7 reinsurers include: Swiss Re, Munich Re, Hannover Re, PartnerRe, SCOR, Everest Re, Alleghany Source: Swiss Re Economic Research and Consulting Investors' Day | Rüschlikon, 8 December 2015 89 I II III IV L&H – Swiss Re with significant portion of profit pool Market share of top 6 reinsurers Swiss Re L&H Reinsurance revenues and operating income2 share vs other reinsurers 40% 70% 30% 20% 10% 0% -10% 2009 2010 2011 2012 2013 2014 9M 2015 Revenues1 Operating income2 2014 was impacted by Swiss Re’s decisive • Average revenue share of 23% management actions in respect of pre- 2004 US YRT business and the unwind of a • Average profit share of 25% funding structure. 1 Revenues exclude net realised investment gains; limited comparability due to different accounting standards of peer group; Top 6 reinsurers include Swiss Re, Munich Re, Hannover Re, PartnerRe, SCOR, RGA 2 Operating income is income before tax and before interest for financial debt, excluding net realised investment gains (losses) Source: Swiss Re Economic Research and Consulting Investors' Day | Rüschlikon, 8 December 2015 90 I II III IV L&H Reinsurance shows strong underlying results – well on track to achieve 2015 ROE target Operating income adjustments • 2014 results impacted by decisive management actions, setting the in USD m FY 2014 9M 2015 foundation for profitable growth Operating income of which approximately 331 986 • 9M 2015 operating income and • Mortality/morbidity experience vs. expected 138 -16 margins have developed within • Model/assumption changes1 -87 81 expected range • VA/GMDB/B361 -1 12 • Mortality/morbidity experience vs. expected is also tracking within • Other one-offs -623 0 our expected volatility Operating margin, % 2.6 10.7 Return on Equity • L&H Reinsurance well on track to achieve its ROE target of 10-12% in % 17.0 • Management of in-force blocks of 11.812.6 ROE, reported business continues to be a key 6.5 priority 5.7 ROE, adjusted2 ROE, adjusted on USD 5.5bn equity3 -7.9 FY 2014 9M 2015 1 Model/assumption changes in relation to VA/GMDB/B36 are shown as part of “Model/assumption changes” 2 Adjusted for realised gains/losses and model-/assumption-updates, and large one offs, net of tax 3 Same as described in footnote 2 and for USD 5.5bn equity capital base, announced in the June 2013 Investors’ Day Investors' Day | Rüschlikon, 8 December 2015 91 I II III IV Four focus areas to broaden and diversify client base to increase access to risk Regionals & Nationals (R&N) Significant growth in volume and number of clients since start of initiative Casualty We actively manage the Casualty business according to the pricing cycle Health Addressing the health-protection need of the ageing population High Growth Markets Continue to expand geographically, and be the global leader Investors' Day | Rüschlikon, 8 December 2015 92 I II III IV R&N – strong growth in volume and number of clients since start of initiative in 2011 Premium development R&N (P&C only)1 • Since the start of our R&N initiative more than 100 new US GAAP Gross Earned Premiums (USD bn) P&C clients have been added on 6 average per year +7% • At the same time retention of 5 existing clients has improved 41% • In 2014, the P&C part of the 4 42% 38% R&N initiative contributed about 47% 44% 46% 22% to Reinsurance EVM 3 Underwriting Profit1 25% 27% 26% 2 2 • R&N with higher profitability 17% 23% 23% compared to average of overall 1 P&C business 33% 32% 36% 36% 33% 31% 0 2010 2011 2012 2013 2014 9M 2015 Europe, Middle East & Africa Asia Americas 1 Data before external retro and other items, average Q3 2015 FX rates used for all years 2 EVM profit margin 2014 (as priced) = EVM Underwriting profit / EVM capital Investors' Day | Rüschlikon, 8 December 2015 93 I II III IV Casualty – we pro-actively manage the Casualty business according to the pricing cycle Premium development Casualty1 • In 2014, Casualty contributed around 11% to Reinsurance EVM US GAAP Gross Earned Premiums (USD bn) Underwriting Profit1 7 • EVM profit margin2 in 2014 at +17% 6 ~7%; further reduction of low- 12% margin business expected (China 5 21% Motor QS) 27% 12% 37% • We pursue a profitability-focused 4 26% 27% expansion, taking into account 18% 3 21% 31% relevant factors, e.g. 10% 10% 16% 13% 33% – rate developments 4% 10% 2 10% 12% 12% 5% – macro economics 16% 12% 15% 5% 5% 4% 1 15% 4% – social, regulatory and legal 5% 27% 26% 29% 36% 18% 18% developments 0 2010 2011 2012 2013 2014 9M 2015 – cession rates Motor EMEA Motor Americas Casualty Asia Motor Asia Casualty EMEA Casualty Americas 1 Data before external retro and other items, average Q3 2015 FX rates used for all years 2 EVM profit margin 2014 (as priced) = EVM Underwriting profit / EVM capital Investors' Day | Rüschlikon, 8 December 2015 94 I II III IV Health – addressing the health-protection need of the ageing population Premium development Health1 • Increasing demand for primary health products, particularly in US GAAP Gross Earned Premiums (USD bn) Asia and the US 4 • Cessions to the reinsurance market are expected to increase +21% in line with growth in the primary 3 market 58% • In 2014, Health business represented about 12% of 2 65% 59% Reinsurance EVM Underwriting 68% Profit1 69% 67% 2 1 • Profitability of Health book 35% slightly above average of overall 28% 34% 24% 21% 25% reinsurance profitability 9% 9% 8% 7% 8% 0 8% 2010 2011 2012 2013 2014 9M 2015 Europe, Middle East & Africa Asia Americas
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