At Monday’s Investors’ Day, Swiss Re confirms its strategy, targets and capital management priorities, underlining its unique client access, leading risk knowledge and capital strength as key drivers of success. The Reinsurance Business Unit is the foundation of the Group’s strength, with increasing earnings power, according to the company. Corporate Solutions is focused on returning to profitability and leveraging its competitive advantages. Life Capital is creating economic value for the Group by expanding its open book business. Swiss Re’s capital position remains very strong.
Swiss Re’s Group Chief Executive Officer Christian Mumenthaler said: “Swiss Re’s strategy is centred around diversifying our access to risk pools by leveraging our risk knowledge, unique client access and capital strength. We are winning an increasing proportion of reinsurance business through our capabilities in underwriting large transactions and providing innovative solutions. We are investing in research and technology to give us an edge in accessing growing risk pools, such as natural catastrophe, and drive forward our Corporate Solutions and Life Capital businesses. The Group’s superior capital strength allows us to capture such opportunities and maintain attractive shareholder returns.“
An integral part of the Group strategy relies on monetising its research and development (R&D) capabilities, thereby cementing Swiss Re’s position as the leading risk knowledge company. The Group is running 80 R&D programs with 450 dedicated FTEs and investing about USD 300 million a year in key technology projects. The aim is to strengthen Swiss Re’s proprietary risk knowledge and to advance its capabilities to enter new risk pools, compete and advise. In particular, digital platforms such as iptiQ, the digital B2B2C business, and Magnum, the leading automated underwriting solution for L&H Re, are becoming a significant business driver.
Asset Management maintains a high-quality investment portfolio
Asset Management is consistently generating attractive returns by taking an industry-leading ESG approach, leveraging its financial markets expertise and benefiting from its flexible investment platform built on latest technology and advanced analytics.
The running yield has been stable at 2.9% for the last four years due to concentration in high quality, longer-maturity securities. Asset Management continues to lead the way in responsible investing, which for example is reflected in Swiss Re being a co-initiator of the UN Net-Zero Asset Owner Alliance launched in September 2019.
Industry-leading reinsurance franchise focused on profitable growth
The Reinsurance Business Unit remains the core engine of profitability for the Group, delivering a market-leading combination of shareholder returns and capital repatriation. P&C Re’s average performance remains strong despite significant natural catastrophe claims in recent years. L&H Re delivers peer-leading returns underpinned by global diversification and strong growth in Asia.
Transactions and Solutions are becoming ever more important to Swiss Re’s offering and demonstrate significant further growth potential. Transactions, which contributed approximately 30% to the Business Unit’s economic profit in 2018, continue to be in demand because they can meet a range of client needs, such as greater capital efficiency or reduced earnings volatility.
With Solutions, Swiss Re helps its clients to deliver on their strategic priorities, such as improving profitability, developing new products or increasing efficiency. The percentage of clients with whom Swiss Re partners on Solutions has grown from 15% to 25% in just two years.
Portfolio steering key to manage growth, profitability and risk exposure
Reinsurance is pursuing a targeted growth strategy supported by robust portfolio steering. Based on expected loss trends, pricing outlook and risk management, the Business Unit is expanding its natural catastrophe franchise, while managing exposure in casualty reinsurance.
Swiss Re intends to further grow and diversify its natural catastrophe portfolio, with a positive effect on earnings. The natural catastrophe reinsurance market is forecast to grow to about USD 40 billion over the next four years from USD 30 billion now, according to Swiss Re Institute. It delivers attractive returns to the Group thanks to proprietary risk knowledge and diversification benefits.
In September 2019 Swiss Re established its Alternative Capital Partners unit in Group Finance by combining its ILS, Retro and Syndication teams. Making use of a broad range of third-party capital vehicles, the unit will enable Reinsurance to grow its natural catastrophe book, while proactively keeping Group peak exposures within risk limits. Alternative Capital Partners follows a differentiated partnership approach and offers third-party investors an opportunity to benefit from alignment with Swiss Re’s underwriting views.
Swiss Re’s Group Chief Financial Officer John Dacey said: “The establishment of Alternative Capital Partners enhances our already flexible capital structure. It allows us to consider all sources of capital holistically.“
Swiss Re’s casualty reinsurance portfolio is well diversified and prudently reserved, giving the Group scope to absorb volatility. The Group is taking targeted actions to improve profitability and manage risk within this portfolio to address a challenging US liability market environment.