The new structure of Swiss Re Group consists of a holding company, Swiss Re Ltd, with three distinct Business Units corresponding to Swiss Re’s core activities in reinsurance, direct corporate insurance, and direct life insurance:
Restructuring can pose a business risk – so it should not be undertaken lightly. Many companies have tinkered with their organisation merely for the sake of it; such attempts are hardly ever successful. Effective restructuring should reduce risk, removing needless complexity and straightening the path between operating returns and shareholder value.
Swiss Re’s new company structure, announced in February 2011, was two years in the making. It required the resolution of thousands of individual questions about client responsibilities, business processes, and legal jurisdiction. The result, however, is clear and simple: one holding company with three Business Units aligned to the dynamics of Swiss Re’s three core activities: reinsurance, direct corporate insurance, and direct life insurance. The new structure gives our Business Units better transparency, greater accountability, and improved scope for initiative. The returns from our three distinct businesses are now out in the open, as well as the options for improving those returns. Our shareholders can see exactly how their capital is put to work.
Reinsurance remains at the heart of Swiss Re’s business, generating about 80% of total premiums; its goal is to be the leader in the wholesale reinsurance market. Corporate Solutions offers opportunities for profitable growth, applying Swiss Re’s renowned underwriting expertise and financial strength to large and complex insurance transactions. The business model of Admin Re® enables diversification into run-off-risks and opportunities for attractive and stable long-term earnings. From a Group point of view, the new structure clarifies capital allocation and asset management for these different businesses, ensuring that funding and investment policy meshes closely with their specific needs. While certain core Swiss Re policies on underwriting and assets remain firmly driven by the Group, it’s not just top-down. Challenges from the Business Units to the Group are welcome. By moving decision-making authority closer to the front line of each business, we make Swiss Re a more agile, flexible company.
“The new structure gives our Business Units better transparency, greater accountability, and improved scope for initiative.”
From the investor’s perspective, the new structure simplifies performance assessment. Starting in 2012, each Business Unit will publish a separate income statement and balance sheet, which will include the investment returns achieved by Asset Management for that Business Unit. In addition, Admin Re® becomes ready to accept third-party investment, allowing for external funding independent from the Group.
Swiss Re’s clients will also see positive change from the new structure. A recurring criticism expressed in client surveys was that decision-making could be slow and bureaucratic, passing through too many layers of approval before action. This was not an intentional choice; indeed, the same criticism appeared in Swiss Re’s own employee surveys. The problem was structural: lines of control had become tangled through years of organic growth and acquisitions. The reorganisation puts the client back at the centre of every decision. The Business Units have not just authority but the incentive to respond quickly and decisively, with customised client service models, as well as client and transaction-specific cross-functional teams that allow for better and faster decision-making.
Regulators are also important stakeholders in any financial institution, particularly as the international supervisory regime undergoes its greatest period of change in half a century. Swiss Re’s new structure, with its transparent capital allocation, fits closely with the way regulators now expect large cross-border groups to do business. One measure of regulators’ comfort with the new operating model is the relative smoothness and speed with which Swiss Re’s proposals in the context of this restructuring were approved.
Client centricity, agility, team spirit, passion to perform and integrity – these are aspects, not just of the organisation, but of how its people should do business every day. The best reason for aligning Swiss Re’s structure with its strategic aims is to create room for employees to exercise their talents and initiative. A clear statement of corporate values now complements Swiss Re’s operating model and business goals. Across the Group, employees and managers will find improved scope to serve their clients, to make decisions and take responsibility, to exercise leadership and accept accountability. There will be greater opportunities to move between divisions and shape a career.
Restructuring can be a risk – but when done right it is an opportunity. The hard work by the Legal, Finance, and Asset Management teams is now complete. Initiatives in the new Business Units are already underway: expanding appetite for profitable risk portfolios, improving client service, entering emerging markets, capturing new growth opportunities. Swiss Re’s strong capital base now supports a more flexible and agile company.