By accelerating the use of technology and data in our industry, we can bring millions more people within the insurance safety net.
How can we use digital solutions to make insurance more accessible? 28
Our Group has gone through this crisis with confidence and strength. We acted early in 2020 to protect our balance sheet from market turmoil with hedges. The strong 3.5% return on investments we achieved for the year also reflects decisive portfolio management actions to cut exposure to sectors that were vulnerable to COVID-19. As a result, impairments in the portfolio were very low at USD 27 million.
per tonne our internal carbon levy as of 2021, rising to USD 200 per tonne by 2030
countries in which Magnum, Swiss Re’s automated L&H underwriting platform, is available
Engaging our people We are an organisation where diverse talents come together globally to apply fresh perspectives and knowledge. For this, it is imperative that we build an engaged, inclusive and agile organisation.
To address the insurability of pandemics and create a more sustainable risk-sharing model for such a scenario, public-private partnerships (PPPs) are key. Ivo Menzinger describes how PPPs help to plug the protection gap and explains what Swiss Re is doing in this rapidly evolving area.
The output from this scenario analysis can be applied to our existing life portfolios to stress test what our financial position would be.
The Trinity Challenge participants thereby have the tools to analyse pandemics and prepare possible responses to mitigate their impact.
Knowledge-transfer partnerships such as The Trinity Challenge enable us to be better prepared for the next pandemic.
A multi-faceted approach At the core of our digital journey is a combination of in-house developments and strategic partnerships, which give us the flexibility and scale to truly transform both our business and that of our clients.
Swiss Re | Business Report 2020 31How can we use digital solutions to make insurance more accessible?
Swiss Re | Business Report 2020 33Swiss Re | Business Report 2020 33How can we use digital solutions to make insurance more accessible?
Decarbonising our investments In 2020, we set a 2025 carbon intensity reduction target of 35% for our corporate bond and listed equity portfolio. As the transition of the real economy is essential to achieve a 1.5°C world, we have introduced an aspirational Engagement Framework that encourages our investee companies to develop a corresponding climate strategy. In addition, we have for the first time set a target to increase investments in renewable and social infrastructure loans by USD 750 million by the end of 2024. Further details are available in the Climate-related Financial Disclosures section of Swiss Re’s Financial Report 2020.
On top of that, we have stepped up to a real internal carbon levy of USD 100 per tonne of CO2. The levy gives a good incentive to further reduce our operational emissions and provides the necessary funding to compensate for our residual emissions via carbon removal. By 2030, the levy will increase to USD 200 per tonne of CO2, the market price we expect for high-quality removal certificates at that point in time.
Brian Beebe Head of Origination North America, Weather and Energy, Swiss Re Corporate Solutions
A. Andreas Roth: Due to COVID-19, Daimler and Swiss Re had a long-distance relationship. So, we had to be organised about exchanging information and ideas.
Type 2 diabetes is one of the major global health concerns. However, it can be managed and prevented. Gro Health is an innovative app with a successful track record for improving health and putting diabetes into remission. In 2020, we piloted Gro Health with Aviva’s employees.
A. iptiQ’s end-to-end technology gives new partners everything they need to enter into insurance. It is also useful for insurers to extend their reach into new products and distribution channels.
A. Simplicity. iptiQ makes insurance easy for companies, who in turn make it easier for their customers. We offer a technological platform from which to underwrite and administer business and manage claims. We also provide services such as behavioural economics to design a great customer journey.
Q. Mr. Kielholz, you became an Executive Board member of Swiss Re in 1993, then the CEO from 1997 until 2002, when you took on the Chairman role at Credit Suisse, and then you returned to Swiss Re as the Chairman in 2009. How has the company developed over the past three decades?
Q. Has the notion of what constitutes superior capitalisation evolved over the past three decades?
1 Paid amount in respective year. 2 Over the period 4 Jan 1993 – 5 Feb 2021, assuming full reinvestment of the dividends.
Swiss Re Centre for Global Dialogue The opening of the CGD placed Swiss Re at the forefront of global risk thought leadership.
Karen Gavan was elected to the Board of Directors of Swiss Re Ltd in 2018. She is a member of the Audit Committee and the Compensation Committee. She is also a member of the Board of Directors of Swiss Re America Holding Corporation.
Group Net income/loss attributable to common shareholders 727 –878 – Gross premiums written 42 228 42 951 2 Premiums earned and fee income 38 594 40 770 6 Earnings per share in CHF 2.46 –2.97 –
– United States (S&P 500) – United Kingdom (MSCI UK) – Europe (Euro Stoxx 50) – Japan (TOPIX) – Switzerland (SMI) Source: Refinitiv, Swiss Re Institute
Outlook We see a recovery to 3.6% growth in 2021 and 2022, supported by rising economic strength (although output will not return to pre-pandemic levels), a hard market in commercial lines to a degree not seen since 2002–2003, and a rebound in most emerging regions.
The underlying, catastrophe-adjusted underwriting result improved. This was partly due to better reinsurance prices, which gained momentum through 2020, after a more moderate January 2020 renewal season. There were rate increases in loss-affected lines and regions, but little spillover into unaffected lines. Significant pricing improvements of 10–20%, however, were registered in the retrocession market, which was adversely affected by high losses between 2017 and 2019 and a significant capacity crunch due to the withdrawal of capital suppliers.
Swiss Re reported a strong underlying performance for 2020, despite the large losses related to the COVID-19 pandemic.
Gross premiums written increased by 1.7% to USD 43 billion in 2020, mainly reflecting large longevity deals and higher volumes in the open book businesses.
Through Swiss Re’s Insurance Response Centre, our free collaborative platform designed to accelerate the industry’s ability to tackle the challenges caused by COVID-19, our clients were able to upload portfolio data and layer on further information sources, such as hospital and ICU bed occupancy. By running statistical analyses and reports using the platform’s coding environments, clients could create new and more accurate models. This allows them to understand and forecast topics such as business interruption patterns and small business resilience.
Expenses Claims and claim adjustment expenses –14 783 –16 403 11
Shareholders’ equity Shareholders’ equity increased to USD 9.2 billion as of 31 December 2020 from USD 8.3 billion on 31 December 2019, primarily driven by unrealised gains and the impact from a restructure of internal loans. This was compensated by the net loss and the dividend paid to the Group. The return on equity for 2020 was –2.8%, compared with 4.4% in 2019. Excluding the after-tax impact of COVID-19-related losses, the ROE was 13.2%.
P&C Re continues to see some good opportunities for transactions and solutions and participated in those that meet its return requirements. Upcoming 2021 renewals will likely show further market hardening, albeit with decreasing momentum due to an increasingly competitive environment.
Net investment income decreased by USD 74 million to USD 1 039 million in 2020 and was driven by recurring income on the fixed income portfolio. The running yield for 2020 was 3.0%, compared to
Insurance-related investment results as well as foreign exchange gains/losses are not included in the figures above.
Operating expenses Operating expenses were USD 613 million in 2020, compared with USD 721 million in 2019. The decrease was driven by the deconsolidation of ReAssure for five months of the year, partially offset by the continued investment into the growth of the open book businesses.
Underwriting performance in 2020 As a result of the COVID-19 pandemic and its unparalleled containment measures, the Group booked substantial claims and reserves for the event across the year, amounting to USD 3.9 billion. Most of these are incurred but not reported (IBNR) reserves, reflecting a developing situation. Besides higher mortality claims, reserves are primarily related to non-damage business interruption and event cancellations.
Swiss Re underwriting and COVID-19 The COVID-19 pandemic has been a major mortality event for Swiss Re’s L&H portfolio. Despite the high human cost of COVID-19, the overall mortality impact is significantly below our modelled one-in-two-hundredyear pandemic event.
Looking forward, the arrival of vaccines is a cause for optimism and we are hopeful that the expected reopening of economies will provide a boost for our re/insurance business.
Key share statistics 2015 – 2020 of which Treasury shares and shares reserved for corporate purposes 32 967 2262 34 093 8343 34 866 5164 38 575 3245 36 749 7626 28 520 907
Price per share year-end 98.15 96.50 91.25 90.12 108.70 83.34 Price per share year high (intra-day) 99.75 97.85 98.50 98.80 110.45 117.05 Price per share year low (intra-day) 74.95 79.00 81.65 84.20 88.90 52.68 Daily trading volume (in CHF millions) 134 120 129 126 120 147 Market capitalisation11 (in CHF millions) 36 385 34 747 31 888 30 516 35 589 26 460 ADR price at year-end (in USD) 24.5312 23.76 23.38 22.84 28.12 23.69 1 Nominal value of CHF 0.10 per share.
Group items reported an EVM loss of USD 191 million in 2020, compared to a loss of USD 184 million in 2019. The EVM loss on new business was USD 238 million in 2020, mainly driven by overhead expenses and capital costs on excess capital, partially offset by trademark licence fees charged to the business segments. The EVM loss on previous years’ business was USD 169 million, mainly driven by an increase in overhead expenses and the impact of a business re-segmentation from Life & Health Reinsurance and Life Capital to Group items. Investment activities generated an EVM profit of USD 216 million in 2020, compared to a loss of USD 6 million in 2019, reflecting improved performance from Principal Investments.
Provision for capital costs 9 850 11 800 Future income tax liabilities 4 203 3 510
The amount of liquidity held is largely determined by internal liquidity stress tests, which estimate the potential funding requirements stemming from extreme loss events. Based on these internal liquidity stress tests, we estimate that Swiss Reinsurance Company Ltd, the most important legal entity of the Group from a liquidity perspective, currently holds significant surplus liquidity.
Swiss Re’s risk profile In SST 2021, Swiss Re’s overall risk increases to USD 22.4 billion (compared to USD 21.3 billion in SST 2020), driven by higher insurance risk, offset partly by lower financial market and credit risk. The higher weight of insurance risk leads to increased diversification at risk category level.
Swiss Re’s resilience to the impact of COVID-19 reflects our financial strength and disciplined approach to risk-taking.
The framework comprises the following major elements: • Risk governance documentation, including Group Risk Policy • Key risk management principles • Fundamental roles for delegated risk-taking • Risk culture and behaviour • Organisation of risk management, including responsibilities at Board and executive level
Risk culture Swiss Re fosters and maintains a strong risk culture to promote risk awareness and discipline across all its activities. This risk culture stands for the risk- and controlrelated values, knowledge and behaviour shared by all employees. Its principal components are summarised in a framework that builds on the Group’s Code of Conduct as well as on key risk management principles in the Group Risk Policy.
Legal entity CROs • Responsible for risk oversight and establishing risk governance in their respective legal entities • Supported by functional, regional and subsidiary CROs as well as dedicated risk teams
Risk transfer To efficiently manage capital across the Group and ensure that risk-taking in individual legal entities is well diversified, the Group employs internal retrocession and funding agreements. These serve to improve the fungibility of capital and consequently Group-wide diversification. In addition, the Group aims to maximise the amount of funds available centrally by optimising the excess capital held within its subsidiaries and branches.
Management Legal entity CROs are responsible for overseeing all property and casualty exposures written in their areas. In addition, Group Risk Management monitors and controls accumulated exposures across Swiss Re to ensure that they remain within the defined risk tolerance level.
• The Group Chief Operating Officer (Group COO) is responsible for the Corporate Real Estate & Services (CRES) division which steers and monitors the reduction of Swiss Re’s direct environmental footprint and is in charge of Swiss Re’s Greenhouse Neutral Programme to reduce our own CO2 emissions as well as the commitment to reach net-zero CO2 emissions in our operations by 2030.
Professional experience Walter B. Kielholz began his career at the General Reinsurance Corporation, Zurich, in 1976, where he held several positions in the US, in the UK and Italy before assuming responsibility for the company’s European marketing. In 1986, he joined Credit Suisse, where he was responsible for relationships with large insurance groups. He joined Swiss Re in 1989, where he became an Executive Board member in 1993 and was Chief Executive Officer from 1997 to 2002. He was also a member of the Board of Directors of Credit Suisse Group Ltd from 1999 to 2014 and served as Chairman from 2003 to 2009.
Professional experience Karen Gavan started her career in finance roles at Prudential Insurance, Imperial Life and Canada Life. She joined Transamerica Life in 1992 as Chief Financial Officer and added responsibilities over her tenure becoming Executive Vice President and Chief Financial Officer from 2000 to 2002 of Transamerica Life Canada/AEGON Canada, and from 2003 to 2005 the company’s Chief Operating Officer. From 2005, Karen Gavan assumed a number of non-executive board mandates. She joined the Board of Economical Insurance in 2008 and, until her retirement in November 2016, also served for five years as President and Chief Executive Officer at Economical Insurance, preparing the company for its initial public offering. During her leadership, the company also launched Sonnet, Canada’s first fully digital insurer.
Susan L. Wagner was elected to the Board of Directors of Swiss Re Ltd in 2014. She chairs the Investment Committee and is a member of the Chairman’s and Governance Committee, the Nomination Committee and the Finance and Risk Committee.
Regional representation 5 US/Canada 4 Switzerland 2 Europe 2 Asia 1 UK
Depending on the responsibility, the Board committees have decision-making powers or act in an advisory capacity. Please refer to page 98 for an overview of the key focus areas of the Board committees in 2020. The Board members’ committee memberships are reflected in their biographies, which can be found on pages 89–93. For an overview of the Board committees’ composition and responsibilities, please refer to: www.swissre.com/board-committees
In addition, an independent external consultant had been engaged in 2019 to assess the effectiveness of the Board through one-on-one interviews with the Board members, with a focus on priority setting, committee work, relationship of the Board with senior management and Board culture. The advisor’s report served as a basis for the self-assessment discussion of the Board at the end of the year. The findings were considered for the preparation of the self-assessment conducted in 2020.
• Proxy voting: Oversaw top investors’ feedback provided at the Chairman’s annual roadshow and during the AGM 2020 proxy solicitation and steered further improvements to ESG-related disclosures
• Reviewed ESG integration in investment process and choice of benchmarks, as well as the efforts to achieve net zero carbon emissions in the investment portfolio by 2050
3 The Group EC members attend Board meetings as deemed appropriate by the Chairman and the other Board members.
Special investigations The Board committees are entitled to conduct or authorise special investigations at any time and at their full discretion into any matters within their respective scope of responsibilities, taking into consideration relevant peer group practice and general best practice. The committees are empowered to retain independent counsel, accountants or other experts if deemed necessary. No special investigations were conducted in the reporting year 2020.
The Board of Directors keeps itself abreast of key risk themes and receives the following annual reports from Group Risk Management: the Swiss Solvency Test Report, the Swiss Re Liquidity Report, the SONAR Report on emerging risks, the Sustainability Report, as well as the Own Risk and Solvency Assessment Report. In addition, Group Risk Management provides the Finance and Risk Committee with regular group risk updates from the Group CRO, semi-annual reports on derivate use, as well as annual reports on global regulatory risk. The Investment Committee receives quarterly reports on financial risk management.
• Board member of the Latin American Chamber of Commerce in Switzerland (subject to election by the Annual General Meeting in 2021)
Professional experience Anette Bronder started her career at Hewlett Packard GmbH, where she held several senior management positions, including Director Software Services for Central & Eastern Europe and Director HP Consulting Germany. In 2010, she was appointed Director of Enterprise Technology at Vodafone GmbH in Germany. In 2013, she assumed worldwide responsibility for the Enterprise Delivery and Operations division of Vodafone Group and was based in London. In 2015, Anette Bronder joined T-Systems International as Managing Director Digital Division, where she oversaw the new growth areas Internet of Things, Public Cloud and Healthcare for Deutsche Telekom worldwide. In 2017, she took on additional responsibility for Deutsche Telekom’s global Security Portfolio and Security Operations. Anette Bronder joined Swiss Re in June 2019 and was appointed Group Chief Operating Officer and a member of the Group Executive Committee effective July 2019.
The Group EC consists of 13 members since 1 September 2020; prior to that, it consisted of 14 members.
On 20 November 2020, Swiss Re held its virtual Investors' Day. Group CEO, Christian Mumenthaler, provided an update on the Group strategy, John R. Dacey, the Group CFO, on Swiss Re’s financial strength and capital management, and the Group CIO, Guido Fürer, on the Group’s asset management. Thierry Léger, the Group CUO, spoke about how underwriting excellence is key to Swiss Re’s success. Moses Ojeisekhoba and Andreas Berger, the CEOs of the Business Units Reinsurance and Corporate Solutions, then gave a strategic update on their businesses. The webcast was attended by a wide range of external participants including portfolio managers, buy-side and sell-side analysts.
PSUs (ROE, ENW growth): 0% to 100% PSUs (rTSR): 0% to 200%
The financial and qualitative assessment each result in a performance factor (Financial Performance Factor/FPF and Qualitative Performance Factor/QPF). The FPF is floored at 0.7 and capped at 1.3, while the QPF is floored at 0.8 and capped at 1.2. The caps and floors in FPF and QPF serve to avoid excessive upward or downward volatility in the Group API Pool and build upon the guiding principles of Swiss Re’s
The FPF and QPF are multiplied and the result can then be adjusted upward or downward based on the overall assessment. In this step, the result of the financial and qualitative assessment is reviewed considering a number of different perspectives, including pay for performance linkage, reasonableness in the market context, affordability and proportionality of value-sharing among employees and shareholders. Combined, the three assessment steps allow for determining a Group Business Performance Factor (Group BPF) based on the following formula:
The Group API Pool is subsequently determined by multiplying the Group TAPI Pool with the Group BPF.
Overall Group assessment and proposal from management to the Compensation Committee.
Plan duration The VAI reflects a longer-term perspective by linking awards to performance over a three-year period.
Performance Share Units: rTSR The third PSU performance condition is rTSR measured over three years. The PSUs vest within a range of 0% to 200%. Vesting starts at the 50th percentile of TSR relative to peers with 50% vesting and is capped at the 75th percentile relative to peers with 200%** vesting. In case of a negative TSR over three years, the Compensation Committee retains the discretion to trigger vesting at a lower level of TSR.
Stock ownership guidelines also apply to the senior executives below the Group EC members (1 × annual base salary).
The fee components are structured to achieve a strong alignment with the interests of Swiss Re Ltd ś shareholders: • Fees are delivered 60% in cash and 40%
The year 2020 was heavily marked by the COVID-19 pandemic for Swiss Re and its employees. Despite this unprecedented situation, the Group performed above expectations across the six qualitative assessment dimensions and related goals considered in the Group API pool funding process.
The Board of Directors considers this limited use of discretion appropriate in the context of 2020. It keeps the Group API pool significantly below target and as such, is in line with the majority of re/insurance organisations, which have projected incentive pools below target levels for 2020. It is also a continuation of Swiss Re’s long-standing practice of having positive but not excessive variable compensation payouts in relatively benign environments and conversely, lower but proportionate variable compensation payouts in adverse environments. This practice is based on Swiss Re considering its role as that of a shock absorber for society, which mitigates excessive volatility and does its part to improve resilience to future systemic risks.
Illustrative example of realised performance for the VAI 2017 (awarded 2018) Granted and realised VAI are shown below for a grant of CHF 100 000 on the VAI 2017 (awarded 2018). For illustrative purposes, this example considers only the Group performance factor. For disclosure of actual realised compensation 2020 for the Group CEO, please refer to page 142 of this Financial Report.
The total compensation of the Group for 2020 amounted to CHF 1937 million (compared to CHF 2086 million in 2019), whereof CHF 1885 million has been or will be paid in cash (compared to CHF 2033 million in 2019) and CHF 52 million has been granted in share-based awards (compared to CHF 53 million in 2019). The 2019 figures have been adjusted to conform to the 2020 presentation.
2 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020. 3 Includes fees received for duties on the board of US Group companies.
Total compensation for the term of office from AGM 2020 to AGM 20213 10 092 1 Including Vice Chairman or subsidiary fees (converted at 2020 average exchange rates where applicable). 2 Excluding company contributions to social security systems paid by Swiss Re in line with applicable laws. 3 Including an amount of approximately CHF 17 000 for minimal benefits and CHF 4 500 for estimated employer pension contributions (as of 1 January 2021) as mandatory under Swiss law.
Shareholder compensation resolutions and awarded compensation The following explanations give an overview of the applicable framework of Swiss Re Ltd’s Articles of Association based on the Ordinance, the approvals by the shareholders at the AGM 2020 of the respective motions proposed by the Board of Directors and the reconciliation of the shareholders’ resolutions with the compensation awarded in the reporting year 2020.
Our climate-related financial disclosures summarise the steps we have taken to manage climate-related risks and opportunities, and achieve our commitments towards net-zero carbon emissions.
<1% Alle anderen Gefahren 1% Überschwemmung8% Tropischer Wirbelsturm 1% Alle anderen Gefahren
Driven by intensifying efforts to curb climate change, the global motor vehicle inventory will shift from combustion to electric engines. In a Swiss Re study on the casualty risk trends in the automotive industry, we noted that the move from conventional (pure combustion engine) cars to more electrically-based mobility is a transition that is likely to intensify in the coming years. This development will entail the implementation of a variety of new technologies, from new lightweight materials to advanced battery systems.
• Write-offs, asset impairment, and early retirement of existing assets due to policy changes (ie stranded assets)
• Research and development (R&D) expenditures in new and alternative technologies
The externally managed real estate portfolio is predominantly invested in Australia, CEE, the UK and the US, and contains 50% green buildings based on regional energy labels. The Australian portfolio is the most advanced, followed by the UK portfolio.
Our dedicated approach to climate risk management involves the systematic monitoring of the carbon footprint of our government bond, corporate bond and listed equity portfolio. For our corporate bond and listed equity portfolio, we also track related forward-looking indicators. In 2020, we further strengthened our approach to assessing the alignment of our portfolio with a 1.5°C target by evaluating the temperature alignment of our corporate bond and listed equity portfolio. As part of our active risk management, we no longer invest in coal and oil sands-related companies that are above the set thresholds, and monitor related investments that are below these thresholds (for specific information on the thresholds please refer to page 175). And consistent with our Group-wide Sustainable Business Risk Framework, we have defined further fossil fuel-related guidelines, such as avoiding investments in the 10% most carbon intensive oil and gas companies (for details, see page 169). Additional actions to support the transition to a net-zero emissions economy are described in Opportunities for our investments (pages 163–165) and Climate metrics and targets (pages 174–175).
First steps to align our underwriting portfolio with the Paris Agreement We have started to develop a carbon risk steering mechanism with the goal to align our underwriting portfolio with the Paris Agreement and decarbonise it by 2050. The first step was the introduction of a thermal coal policy, followed by the revision of our oil and gas policy (see page 169, Climate risk management, for details). In 2020, we applied for the first time the carbon footprinting methodology we had previously co-developed with the CRO Forum to underwriting. We applied
Versicherte Schäden Quelle: Swiss Re Institute*Nordamerika und Lateinamerika/Karibik in Mrd. USD, zu Preisen von 2020
US IG corporate bond portfolio US Corp IG ESG BB+ index
2 Because of the distorting effect of the COVID-19 crisis, we also show the figures per end of 2019.
In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”. The ASU provides selective clarifications and corrections of guidance on credit losses, hedging, and recognising and measuring financial instruments. The Group adopted the standard on 1 January 2020 with the exception of the guidance relating to ASU 2016-13 “Measurement of Credit Losses”. The adoption did not have an impact on the Group’s financial statements. The amendments related to credit losses will be adopted together with ASU 2016-13 as required by the standard.
Claims ratio in % 76.7 93.6 79.7 Expense ratio in % 31.1 34.3 31.7 Combined ratio in % 107.8 127.9 111.4 Management expense ratio¹ in % 5.2 Net operating margin2 in % 3.8 10.0 –16.7 2.4 3.4 1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net investment result – unit-linked and with-profit business”.
Property & Casualty Reinsurance business segment – by line of business For the year ended 31 December 2020 Property Casualty Specialty Unallocated Total USD millions
Expenses Claims and claim adjustment expenses –6 785 –7 570 –2 048 –16 403 Acquisition costs –1 640 –2 732 –732 –5 104 Operating expenses –604 –443 –153 –1 200
Premiums earned 9 192 4 533 13 725 Fee income from policyholders 158 158 Net investment income – non-participating business 870 270 1 140 Net realised investment gains/losses – non-participating business 54 –12 403 445 Net investment result – unit-linked and with-profit business –32 –32 Other revenues 3 1 4
Management expense ratio1 in % 5.1 5.5 5.2 Net operating margin2 in % -1.6 4.6 2.9 1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net investment result – unit-linked and with-profit business”.
For Corporate Solutions, claims frequency is displayed for direct business only, as individual claims information is generally not available for assumed and ceded business. Claims are counted individually per contract to produce the claims frequency table. For some direct business, summary reports are received and multiple claims are booked under a single claim code; this is usually done at a programme, policy year, state, country and/or line of business level of detail. This approach may be applied to business which has a high volume of claim counts, but with only minor claims dollars associated with each claim.
Total fixed income securities available-for-sale 74 780 79 163 73 862 81 080
Accrued expenses and other liabilities 3 486 0 2 291 0 2 316 8 093 1 Amounts do not relate to financial assets or liabilities.
Derivative financial instruments – assets 1 609 –1 343 266 –3 263 Reverse repurchase agreements 4 945 –1 943 3 002 –3 002 0 Securities borrowing 292 –10 282 –280 2
Investment real estate 143 –143 0 Other invested assets 317 140 411 868 Funds held by ceding companies 174 174
The hedge fund investments employ a variety of strategies, including relative value and event-driven across various asset classes.
Lease liabilities and right-of-use assets Lease liabilities and right-of-use assets for operating leases as of 31 December were as follows: Operating lease right-of-use assets 485 471 Operating lease liabilities 531 524
Maturity of lease liabilities As of 31 December, the total undiscounted cash flows due to operating leases for the next five years and thereafter were as follows: Less than one year 89 90 Between one year and two years 77 80 Between two years and three years 69 73 Between three years and four years 61 63 Between four years and five years 55 51 After five years 239 232
Lease cost The composition of total lease cost for all operating leases for the year ended 31 December was as follows: Fixed operating lease cost 87 89 Other lease cost1 3 5
Effect of dilutive securities Change in income available to common shares due to convertible debt 14 Change in average number of shares due to convertible debt 13 143 130 Change in average number of shares due to employee options 704 411
On 17 April 2020, the 2020 Annual General Meeting resolved the cancellation of the 9.9 million repurchased shares by way of share capital reduction. The share capital reduction was registered in the Commercial Register of the Canton of Zurich on 23 July 2020 and publication in the Swiss Commercial Gazette occurred on 28 July 2020. Swiss Re Ltd’s shareholders authorised the SRL Board of Directors to repurchase up to a maximum CHF 1 billion purchase value of Swiss Re Ltd’s own shares by way of a public share buyback programme for cancellation purposes prior to the 2021 Annual General Meeting. At the post-AGM meeting, the Board of Directors decided that the share buyback programme would not be launched.
For the year ended 31 December 2020, the tax rate was largely driven by tax benefits from tax-exempt income and the release of valuation allowance on deferred tax assets, partially offset by tax charges from intra-entity transfers and foreign currency translation differences between statutory and US GAAP accounts. The tax rate in the year ended 31 December 2019 was largely driven by tax benefits from effective settlement of tax audits and tax-exempt income, partially offset by tax charges from other income based taxes and non-deductible expenses.
As of 31 December 2020, the Group had USD 14 061 million net operating tax loss carryforwards, expiring as follows: USD 6 million in 2021, USD 3 million in 2022, USD 7 million in 2023, USD 841 million in 2024, USD 7 495 million in 2025 and beyond, and USD 5 709 million never expire.
For the year ended 31 December 2020, net operating tax losses of USD 1 596 million and net capital tax losses of USD 1 036 million were utilised.
Benefit obligation as of 1 January 3 832 2 270 319 6 421 Service cost 99 8 3 110 Interest cost 29 67 7 103 Amendments –1 –1 Actuarial gains/losses 307 297 24 628 Benefits paid –59 –95 –16 –170 Employee contribution 32 32 Effect of settlement, curtailment and termination –150 –150 Effect of foreign currency translation 75 42 4 121
Net amount recognised –20 44 –340 –316 2020 USD millions Swiss plan Foreign plans Other benefits Total
Asset category Equity securities 26% 26% 23% 8% 5% 6% Debt securities 41% 37% 46% 76% 75% 86% Real estate 18% 18% 23% 0% 0% 0% Other 15% 19% 8% 16% 20% 8%
As of 31 December, the fair values of pension plan assets were as follows: Fair value
Expected contributions and estimated future benefit payments The employer contributions expected to be made in 2021 to the defined benefit pension plans are USD 127 million and to the postretirement benefit plan are USD 18 million.
Share in earnings and dividends received from equity-accounted investees for the years ended 31 December, were as follows: Share in earnings of equity-accounted investees 387 –51 Dividends received from equity-accounted investees 104 124
United Kingdom IptiQ Holdings Limited, London GBP 0 100 f Swiss Re Finance (UK) Plc., London GBP 1 100 f Swiss Re Capital Markets Limited, London USD 60 100 f Swiss Re Life Capital Regions Holding Ltd, London GBP 0 100 f Swiss Re Services Limited, London GBP 2 100 f 1 Net asset value instead of share capital.
China Swiss Re Corporate Solutions Insurance China Ltd, Shanghai CNY 569 100 f
Other The Group consolidates a vehicle providing reinsurance to its members, because it serves as a decision maker over the entity’s investment and underwriting activities, as well as provides retrocession for the majority of the vehicle’s insurance risk and receives performance-based fees. Additionally, the Group is obligated to provide the vehicle with loans in case of a deficit. The vehicle is a VIE, primarily because its total equity investment at risk is insufficient and the members lack decision-making rights.
We assessed and tested the design and operating effectiveness of selected relevant controls relating to the application of the actuarial methodology, data collection and analysis, as well as the processes for determining the assumptions used by the Group in the valuation of P&C loss reserves.
 Where there was significant estimation uncertainty, performing sensitivity tests to determine the impact of selected key assumptions.
Based on the work performed, we determined the Group’s conclusions with regard to the valuation of P&C loss reserves to be reasonable.
Expenses Claims and claim adjustment expenses –8 810 –7 763 –9 655 Life and health benefits –8 414 –8 878 –9 581 Return credited to policyholders –61 –2 959 –3 678 Acquisition costs –4 021 –4 548 –4 895 Other operating costs and expenses –3 902 –3 953 –4 268
An overview of the subordinated debt facilities is provided in the following table: As of 31 December 2020 Domicile Currency Share capital (millions) Affiliation in % Voting interest in %
As of 31 December 2020, Swiss Re Ltd had outstanding debt of CHF 442 million (2019: CHF 484 million).
Jacques de Vaucleroy, member, Chair Compensation Committee 198 2 129 202 2 676 Susan L. Wagner, member, Chair Investment Committee 238 2 560 242 3 205 1 Represents the portion (40%) of the total fees for the members of the Board of Directors that is delivered in Swiss Re Ltd shares, with a four-year blocking period. 2 The number of shares is calculated by dividing the portion (40%) of the total fees with the average closing price of the shares on the SIX Swiss Exchange during the ten trading days preceding
Allocation to voluntary profit reserves –936 –1 573 Retained earnings after allocation – –
We further confirm that the proposal for allocation of disposable profit (page 306) complies with Swiss law and the Company’s Articles of Association. We recommend that the financial statements submitted to you be approved.
EVM capital is the capital required to support uncertainty related to estimated cash flows arising from existing underwriting and investment activities.
Some of the terms included in the glossary are explained in more detail in Note 1 to the Group financial statements.
Liquidity risks The Group’s business requires, and its clients expect, that it has sufficient capital and sufficient liquidity to meet its re/insurance obligations, and that this would continue to be the case following the occurrence of any foreseeable event or series of events, including extreme catastrophes, that would trigger insurance or reinsurance coverage obligations. The Group’s uses of funds include, among other things, its obligations arising in its insurance and reinsurance businesses (including claims and other payments as well as insurance provision repayments due to portfolio transfers, securitisations and commutations), which may include large and unpredictable claims (including catastrophe claims), funding of capital requirements and operating costs, payment of principal and interest on outstanding indebtedness and funding of acquisitions. The Group also has unfunded capital commitments in its private equity and hedge fund investments, which could result in funding obligations at a time when it is subject to liquidity constraints. In addition, the Group has potential collateral requirements in connection with a number of reinsurance arrangements, the amounts of which may be material and the meeting of which could require the Group to liquidate cash equivalents or other securities.
Counterparty risks The Group is exposed to the risk of defaults, or concerns about defaults, by its counterparties. Issuers or borrowers whose securities or loans the Group holds, trading counterparties, counterparties under swaps and other derivative contracts, clearing agents, clearing houses and other financial intermediaries may default on their obligations to the Group due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operations failure, fraud or other reasons, which could also have a material adverse effect on the Group. The Group has increased its allocation to higher return-generating strategies, including high-quality corporate debt and some alternative assets, which tend to also be subject to potentially greater counterparty risk.
Legal and regulatory risks In the ordinary course of business, the Group is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which determine the Group’s rights and obligations under insurance, reinsurance or other contractual agreements. From time to time, the Group may institute, or be named as a defendant in, legal proceedings, and the Group may be a claimant or respondent in arbitration proceedings. These proceedings could involve coverage or other disputes with ceding companies, disputes with parties to which the Group transfers risk under reinsurance arrangements, disputes with other counterparties or other matters. The Group cannot predict the outcome of any of the foregoing, which could be material for the Group.
Working with our clients across the globe to develop risk transfer solutions that meet their needs is our core business. 2020 was no different: Recently introduced solutions, for example, enable the renovation of a historic dam to protect the Netherlands from climate risks, facilitate the construction of offshore wind farms in Taiwan, offer protection from natural catastrophes in Mexico and deploy digital life insurance protection in China. Reflecting our Group Sustainability
We have also continued our efforts to gradually decarbonise our entire business, aimed at achieving net-zero emissions both in underwriting and asset management by 2050. In underwriting, we strengthened our exit strategy for thermal coal by defining measures and targets for our treaty business, through which we reinsure whole policy portfolios of direct insurers. And we started to implement our revised oil and gas policy with the aim of ceasing support for the most carbon-intensive companies in this sector within the next few years.
• >400 dialogue engagements with clients on thermal coal (page 38)
The importance of biodiversity Countries around the world depend on a range of vital natural services – known as biodiversity and ecosystem services (BES) – to help maintain the health and stability of their communities and economies. These include, for example, water provision, food security and the regulation of air quality. In fact, 55% of global GDP is dependent on intact ecosystems. However, a recent study published by Swiss Re Institute revealed a serious decline in biodiversity and ecosystem services, affecting both developing and advanced economies.
• New: Reduce the carbon intensity of our corporate bonds and listed equity portfolio by 35% by 2025 (with base year 2018).
The Sustainability Report as well as the chapter on climate-related financial disclosures (TCFD) in the Financial Report have received independent assurance from PricewaterhouseCoopers. Their assurance report is included on pages 92 – 93.
Nature-based solutions We can insure and protect nature and ecosystem services in the same way we protect man-made property and personal assets. Read more about the BES Index and naturebased solutions on pages 14 and 58, and on our website.
Initially distributed in the spring by a leading regional insurance broker, elipsLife’s risk insurance solution quickly gained recognition in the Italian market as an innovative product that provides peace of mind to an underserved segment of the population. elipsLife has since partnered with 17 additional brokers to distribute this risk insurance solution to 6 000 Italian employees in 2020. As an expert in employee benefits, elipsLife and Swiss Re remain committed to reducing the protection gap in Italy while strengthening the financial resilience of families.
Risk management is an integral part of Swiss Re’s business model and key to the controlled risk-taking that underpins our financial strength. It is embedded throughout our business and ensures that the Group and the two Business Units have the necessary expertise, frameworks and infrastructure to support good risk-taking. This allows us to be a reliable partner for our clients and make the world more resilient. You can find out more about the core categories of Swiss Re’s risk landscape in the Financial Report 2020, page 68.
• Launched an updated version of our “Sustainable Business Risk Framework” publication.
In 2020, we developed an exit strategy for thermal coal in our treaty business (through which we reinsure whole portfolios of direct insurers), holding over 400 client engagements in the process. This treaty approach complements the policies we have already developed focusing on our direct and facultative business. Together, they set us on course to reach our Group-wide target of completely phasing out our thermal coal business in OECD countries by 2030, and in the rest of the world by 2040.
Value-chain CO intensity* for global oil and gas production in 2019
We regularly review all the policies and guidelines of our Sustainable Business Risk Framework to ensure they stay abreast of new risk developments and changing stakeholder expectations. In 2020, we developed a thermal coal phase-out strategy for our treaty business and continued with the implementation of our revised oil and gas policy. These improvements to the Sustainable Business Risk Framework form an important part of the efforts we have taken towards gradually decarbonising our business model (see pages 37–38).
This decision takes the form of a binding recommendation either to go ahead with the transaction, to go ahead with certain conditions attached or to abstain. If there is disagreement about the recommendation, the case can be escalated to the next management level and, ultimately, to the Group Chief Risk Officer and the Group Executive Committee.
258 Sustainable Business Risk transactions referred to our team of sustainability experts (238 in 2019)
Benchmarked against different sustainability standards (GRESB) and certificates (MINERGIE® standard, LEED certification, NABERS rating, BREEAM certification) depending on the location of the property 31% of Real Estate portfolio invested in certified buildings1 1 For further information. please refer to our Financial Report 2020, TCFD section (148 –179). Level of ESG integration per asset class
≈715 000 low-income individuals provided with health insurance and products acting as safety nets for health related risks
In the third event, the focus switched to the UN Sustainable Development Goals (SDGs) and the re/insurance industry’s contribution to them. While many of its products and services already support the SDGs, efforts will need to be further strengthened. It was argued that an industry-wide roadmap would create additional momentum. Contributions and discussions then turned to important elements of such a roadmap, identifying consistent frameworks for impact measurement, increasing transparency and innovation utilising digitisation. For all of them, partnerships among multiple stakeholders were said to be vital. To make progress towards these goals, an initiative led by the UNEP FI PSI to develop Insurance SDGs was formally launched at the event.
The second event of the series then looked at how to effectively tackle sustainability risks in underwriting. Two key notions were advanced during the debate: that an integrated, broad-based risk management approach is superior and that sustainable business is good business in the long term. This means that the sustainability agenda really is at the heart of commercial activity. Building on the insights of the first event, it was reiterated that we face a dual challenge: climate change and biodiversity loss. While climate change has been at the top of the agenda in recent years, participants agreed that the financial sector needs to do more to address biodiversity risks. Fittingly, the event served as a launch pad for a report produced jointly with the WWF on spatial finance.
See WWF/Swiss Re Institute 2020: Conserving our common heritage. The role of spatial finance in natural World Heritage protection. Also see www.wwf.org.uk/ what-we-do/projects/nature-and-spatialfinance, and com/, initiated by the Oxford University Sustainable Finance programme.
CRO Forum publication “Carbon footprinting methodology for underwriting portfolios” This report is the result of an industrywide effort to summarise options, challenges and opportunities that re/ insurance companies face in the process of assessing the carbon footprint of their liability portfolios. It discusses different carbon footprinting methodologies that may be applied to underwriting portfolios. The general methodology presented in the paper proposes an estimation based on company- and industryspecific carbon intensity information, allowing hotspots to be identified and comparisons to be made across liability and investment portfolios. In 2020, we started to apply the methodology to our direct insurance portfolio (see page 38).
As part of our efforts to advance sustainable energy sources, Swiss Re Institute launched an expertise publication looking at the current state and prospects of the renewables sector in Africa. With projections for strong economic growth in the longer term, increasing populations and urbanisation, demand for power is expected to grow substantially in future.
Paper, water and waste In the second commitment cycle of our Greenhouse Neutral Programme, we have also calculated and compensated our CO2 emissions from the Scope 3 sources of copy paper, waste generation and water use. The overview of our emissions sources on page 65 shows, however, that these are less material for our business than other environmental impacts, which is why we have not set quantitative reduction goals for them.
• 81% of our employees agree that Swiss Re provides an open and inclusive work environment.
• Average tenure of Swiss Re employees remains high at over seven years, a testament to the engaging and fulfilling work environment we seek to offer
In 2020, Swiss Re launched a new Group Strategy, and with this, a new Group People Strategy. Our clients and partners are at the heart of our People Strategy. We achieve our common goals through our human capital, or simply put: our people. This is captured in the Group People Strategy 2025, which sets out what we desire to achieve in order to create the environment that enables each one of us to give our personal best. Delivering on the Group People Strategy 2025 is a key enabler for the success of the new Swiss Re Group Strategy.
In our Group People Strategy, we put a strong focus on developing our employees to build our leadership pipeline. In 2019 we introduced a new set of “Leadership Imperatives” ‒ our enhanced behavioural framework to promote greater ownership and accountability at all levels. In this context, we launched a revised performance management approach to foster individual growth and development, with stronger emphasis on continuous dialogue and frequent conversations between employees and their managers, which aims to provide forward-looking, ongoing and timely feedback. This change in our performance development practice followed the encouraging results of a number of pilot initiatives conducted over the last two years with over 2 000 employees. As a part of these changes, we removed year-end ratings in 2020 to focus on developmental and qualitative aspects of performance management.
• We offer independent and confidential advice and counselling to those facing difficult circumstances through external Employee Assistance Providers, in every location, free of charge.
• We offer peer group discussions (mental health talks), mindfulness sessions and coaching to all employees, across the globe.
Key activities included: • Started as a local grassroots initiative in the UK, Pathways, Swiss Re’s mental health network, went global in 2020. Global executive sponsors are leading this initiative.
• Demonstrated commitment to tax transparency including the publication of our tax transparency report.
The Group EC has established the Group Sustainability Council (GSC), an advisory body, to better coordinate and align sustainability activities at Group level. The GSC reviews the annual sustainability assessment as well as the sustainabilityrelated performance targets, which are considered for determining the Group Annual Performance Incentive (API) pool (see below). The GSC is composed of Group EC members and other senior management representatives and is chaired by the Group Chief Risk Officer.
The sustainability assessment in 2020 is primarily based on qualitative key performance indicators (KPIs) and targets. These are aligned with our 2030 Sustainability Ambitions and our net-zero commitments.
• The reporting intake methods for the ICP cases that were investigated in 2020 were: through internal channels, including reporting directly to Compliance, via line managers and via Human Resources (74%), from external sources (11%), the whistleblowing hotline (8%) and process detection (8%).
We also delivered major financial support to our long-time partner, the International Committee of the Red Cross (ICRC). The aim was to help bolster their projects in conflict regions where people have been severely affected by the COVID-19 pandemic.
In 2020, we performed a review of our reporting scope and calculation as follows: • The sale of ReAssure in 2020 resulted in the removal of three offices in the UK from our reporting scope. As they were a significant source of emissions in the EMEA region, this led to a large reduction in the Group’s overall emissions.
• An update to our technical gas calculations now allows us to more accurately track leakages from large tanks and generators, rather than only “charging“ emissions at the point of refill. This led to a significant increase in the emissions tracked for technical gases.
3. The ReAssure offices were paperintensive due to the nature of their consumer-facing insurance business.
Percent recycled waste out of total % 52% 49% 50% 54% 5%
Inherent limitations The accuracy and completeness of environmental indicators are subject to inherent limitations given their nature and methods for determining, calculating and estimating such data. GHG quantification is subject to inherent uncertainty, because of the incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases. Our assurance report should therefore be read in connection with Swiss Re’s reporting criteria (including guidelines, definitions and procedures on the reporting of its sustainability performance).
Principles for Responsible Investment (PRI) The PRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. Swiss Re’s PRI assessment is available here. www.unpri.org