Swiss Re confirms strategy at Investors' Day, targets for higher returns in Life & Health business
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- Swiss Re confirms Group strategy; focus on execution
- Life & Health Reinsurance ROE expected to increase to 10-12% by 2015; impact of pre-2004 US Individual Life business to be actively managed
- Dividend growth, capital allocation to profitable business opportunities and rebalancing of asset allocation remain priorities
- Plans to reduce debt levels by 2016
- Increased focus on productivity, re-allocating savings to high growth markets
At its Investors' Day to be held in Zurich today, 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."
Notes to Editors
The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk-taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of over 60 offices globally and is rated "AA-" by Standard & Poor's, "A1" by Moody's and "A+" by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN. For more information about Swiss Re Group, please visit: www.swissre.com or follow us on Twitter @SwissRe.
Cautionary note on forward-looking statements
Certain statements and illustrations contained herein are forward-looking. These statements (including as to plans objectives, targets and trends) and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact.
Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results of operations, financial condition, solvency ratios, liquidity position or prospects to be materially different from any future results of operations, financial condition, solvency ratios, liquidity position or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets. Such factors include, among others:
- further instability affecting the global financial system and developments related thereto, including as a result of concerns over, or adverse developments relating to, sovereign debt of euro area countries;
- further deterioration in global economic conditions;
- Swiss Re’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of Swiss Re’s financial strength or otherwise;
- the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;
- changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions;
- uncertainties in valuing credit default swaps and other credit-related instruments;
- possible inability to realise amounts on sales of securities on Swiss Re’s balance sheet equivalent to their mark-to-market values recorded for accounting purposes;
- the outcome of tax audits, the ability to realise tax loss carryforwards and the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings;
- the possibility that Swiss Re’s hedging arrangements may not be effective;
- the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings;
- the cyclicality of the reinsurance industry;
- uncertainties in estimating reserves;
- uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available;
- the frequency, severity and development of insured claim events;
- acts of terrorism and acts of war;
- mortality, morbidity and longevity experience;
- policy renewal and lapse rates;
- extraordinary events affecting Swiss Re’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events;
- current, pending and future legislation and regulation affecting Swiss Re or its ceding companies, and the interpretation of legislation or regulations;
- legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability;
- changes in accounting standards;
- significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions;
- changing levels of competition; and
- operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks.
These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.