Into the eye of the future Michel M. Liès, Group CEO Swiss Re PwC Breakfast Briefing Monte Carlo, 10 September 2012
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 2
Today's agenda
Setting the stage: Challenging environment
On stage: What this means for the insurance industry
Backstage: Looking into the future
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
Setting the stage: Challenging environment
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Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
shrinking client loyalty
mature markets, high growth markets
4
Challenging environment – not just for insurers
changing risk landscape
weak growth
financial markets, sovereign debt
regulatory environment
low interest rates, inflation, price
pressure
Insurance Industry
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
July 1997 Asian financial crisis
2008 Economic and financial crisis
1990s U.S. Savings and Loan crisis
1980s U.S. Savings and Loan crisis
2000 Dot.com bubble
0
5
10
15
20
25
Central Banks' Policy Rates (in %)
US Federal Fund Target Policy Rate Bank of England Policy Rate European Policy Rate Index (Composite*)
5
Historically low interest rate environment
Source: Bloomberg data as of 20 March 2012 * Including German Repo Rate until 31.12.1998 and ECB Refinancing Rate from that date onwards
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
How do low interest rates affect non-life insurance?
Combined ratio
ROE
5.1%
4.1%
3.1%
Investment yield
0%
2%
4%
6%
8%
10%
12%
14%
95% 97% 99% 101% 103% 105% 107%
Based on US industry data for 2011
Source: Swiss Re Economic Research & Consulting
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
Slowdown of economic growth
-4%
-2%
0%
2%
4%
6%
8%
10%
2005 2006 2007 2008 2009 2010 2011
Real GDP growth
Advanced markets Emerging markets World
Source: Economic Research & Consulting
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Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 8
2011: Annus horribilis in terms of natural catastrophes
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 9
The insurance and financial services industry has entered a new phase in terms of regulatory reforms
Speed and number of reforms is alarming
The insurance sector has limited time to engage and assess the impact of the regulatory reforms…
Many regulators and policymakers are also overwhelmed…
The regulatory clock is ticking...
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
On stage: What this means for the insurance industry
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Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
Premium growth was only negative twice before the financial crisis of 2008
-10%
-5%
0%
5%
10%
15%
20%
25%
19
61
19
63
19
65
19
67
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
Real growth rates
Total Non-life Life
2008: Great recession & after 1980: Global recession 1973: Oil crisis
Source: Economic Research & Consulting
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Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
Economic recovery, interest rates and regulatory developments impact profitability
Profitability of global non-life insurance industry (% of premiums, shareholder capital)
Source: Economic Research & Consulting; Aggregation based on eight major insurance markets
12
-15
-10
-5
0
5
10
15
20
1999 2001 2003 2005 2007 2009 2011 2013 2015Underwriting result Investment result Operating result ROE after tax
?
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
Backstage: Looking into the future
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Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 14
Insurance penetration remains low – huge potential
0
50
100
150
200
250
300
80 85 90 95 00 05 10
Economic Loss…Insured Loss…
Natural catastrophe losses 1980-2011* in USD bn
% of people claiming to be financially "well positioned" in event of suffering a long-term illness or disability, or death
Note: Loss amounts indexed to 2010 Source: Swiss Re sigma catastrophe database
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 15
Risk landscape is changing
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 16
Smart expansion
Product-oriented
Client-oriented
Relevant to society
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 17
The re/insurance industry absorbs shocks…
2001: World Trade Centre 47% of the total losses were paid by insurance sector. Reinsurers assumed 50%~60% of insured losses1. 2005: Hurricane Katrina, Rita and Wilma 50% of the total losses were paid by the insurance sector. Reinsurers assumed 35% of insured losses 2010: Earthquake in Chile 27% of the total losses were paid by the insurance sector. Reinsurers assumed 95% of insured losses 2011: Earthquake in New Zealand 80% of the total losses were paid by the insurance sector. Reinsurers assumed 70% of insured losses 2011: Earthquake in Japan 17% of the total losses were paid by the insurance sector. Reinsurers assumed 40% of insured losses
1Based on Holborn, 2009 catastrophe losses
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 18
…and provides capital for the real economy
Sources: Pension funds – CityUK; Insurers – Swiss Re Economic Research & Consulting; Mutual funds – Investment Company Institute; Sovereign wealth funds – Sovereign Wealth Funds Institute; Private equity – Deutsche Bank; Hedge funds – Hedge Fund Research, Inc.
30.9
25.0
23.8
4.8
2.6
2.0
0 10 20 30 40
Pension funds
Insurance companies
Mutual funds
Sovereign wealth funds
Private equity
Hedge funds
Year-end 2011, USD trillion
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012 19
Re/insurers absorb shocks, provide capital for the real economy and support risk prevention
this becomes ever more important in a challenging environment
Thank you
Michel M. Liès, Group CEO Swiss Re | PwC Breakfast Briefing | Monte Carlo, 10 September 2012
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Although all the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation.
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