At its Investors’ Day to be held in Zurich, Swiss Re confirms its commitment to executing its successful Group strategy and delivering on its 2011-2015 financial targets. The Group also presents a detailed review of its existing Life & Health Reinsurance business and sets out a path to higher profitability. It also outlines the Group’s approach to capital management and an increased focus on productivity.
Michel M Liès, Swiss Re’s Group Chief Executive Officer, says: “Our strategy has produced excellent results and we continue to focus on performance and growth. In February this year, I highlighted the need to address issues in our L&H Reinsurance business. Today we are outlining the management actions that we believe will strengthen the performance of this important segment of our business. Our financial performance going forward will also benefit from the capital management measures we are outlining today and continued rebalancing of our asset allocation.”
L&H Reinsurance targets ROE of 10-12% by 2015
Swiss Re is presenting the results of an in-depth review of its existing Life & Health Reinsurance business. The review confirms that the vast majority of business is meeting or exceeding original profitability expectations. The exception is the Individual US Life portfolio of business written prior to 2004. Swiss Re has identified the steps required to improve the performance of this business and they are already underway.
By 2015, L&H Reinsurance expects to generate ROEs of 10-12%. It is expected that near-term management actions to improve profitability will temporarily reduce L&H Reinsurance US GAAP earnings in 2014 by approximately USD 0.5 billion before tax.
Swiss Re will also enhance its organisational setup to manage L&H Reinsurance. A newly established Life & Health Business Management division will focus on the active management of the in-force portfolio.
Reduce leverage and shift assets towards more corporate debt
Swiss Re reiterates its capital management priorities: growing the regular dividend and allocating capital to support profitable business opportunities.
In order to maximize Group ROE, Swiss Re plans to reduce leverage by more than USD 4 billion by 2016. As part of this effort, a Swiss Re subsidiary today is launching a tender offer to repurchase three tranches of its senior debt.
In asset management, Swiss Re will continue with its previously announced rebalancing efforts, with a prudent move towards high-quality corporate debt and a reduction in government bonds.
George Quinn, Swiss Re’s Group Chief Financial Officer, says: “Our capital management strategy remains unchanged. A strong capital position allows us to continue our policy of deploying Group capital to take advantage of profitable business growth opportunities after having delivered on our first priority, which is paying an attractive, growing regular dividend to our investors. We have also used our capital strength to rebalance our asset allocation.”
Emphasis on productivity gains to finance growth
By 2015, Swiss Re expects costs savings of USD 250-300 million, which will then be redeployed across the Group to areas which offer attractive financial returns. One example is the move into high growth markets, where the proceeds of Swiss Re’s cost savings efforts can be used to finance the shift of personnel and resources into these markets.
Looking beyond 2015
At the Investors’ Day 2013, Swiss Re’s Group CEO, Michel M. Liès, provides an overview of the relevant longer-term strategic themes for the Group. These include the growing demand for insurance and reinsurance solutions in high growth markets and the importance of R&D in areas such as big data for insurance underwriting.
Michel M. Liès concludes: “Our top priority is delivering on the financial targets set for 2011-2015. But we do of course look beyond 2015 and thus anticipate the strategic themes that will shape the global economy and the long-term demand for re/insurance. I am confident we are well prepared for the opportunities and challenges beyond 2015.”