Life & Health Reinsurance Net income attributable to common shareholders –462 939 Premiums earned and fee income 11 265 10 963 –3 Operating margin in % 2.6 9.9 Return on equity1 in % –7.9 15.7
Combined ratio in % 93.0 93.8 Return on equity1 in % 12.5 14.8
Admin Re® Net income attributable to common shareholders 34 422 Premiums earned and fee income 955 782 –18 Gross cash generation3 945 543 –43 Return on equity1 in % 0.6 7.5 1 Return on equity is calculated by dividing net income attributable to common shareholders by average common shareholders’ equity. 2 Regular staff 3 Gross cash generation is the change in excess capital available over and above the target capital position, with the target capital being the minimum statutory capital plus the additional capital required by Admin Re®’s capital management policy.
Swiss Re at a glance 2 Swiss Re 2015 Business Report
Corporate Solutions Corporate Solutions serves mid-sized and large corporations, with product offerings ranging from traditional property and casualty insurance to highly customised solutions. Corporate Solutions serves customers from over 50 offices worldwide.
Admin re® Admin Re® provides risk and capital management solutions by which Swiss Re acquires closed books of in-force life and health insurance business, entire lines of business, or the entire capital stock of life insurance companies. As of 1 January 2016, the open and closed life insurance books of the Group, including Admin Re®, are managed under a new Business Unit called Life Capital.
Dear shareholders, Another very successful year for your company has just ended and the Financial Report will explain it in great detail. For this success to happen we needed, of course, benign circumstances, but we also needed the full effort of dedicated employees, our loyal clients and, last but not least, the support of our shareholders. To the many that contributed throughout the year, my sincere thanks.
Particularly amazing is that the high margins are achieved despite continuously decreasing investment returns which in our business have always been an important contributor to margins. Central banks’ extremely easy monetary policies in our main markets are certainly a challenge for an industry which carries large balance sheets full of financial assets.
Of course we spend a lot of time researching investible ideas in all our businesses. Sometimes with more success (like the acquisition of the Guardian life portfolio last year), sometimes with less … and if we don’t find a good place to invest, then we can also distribute more money back to you. To some degree that has been the case this year, so we plan to propose a regular dividend of CHF 4.60 per share, as well as a new share buy-back programme of up to CHF 1 billion.
We are quite open about what we consider an adequate capital underpinning of our underwriting and investment activities. This gives our clients real peace of mind when they allocate large chunks of their reinsurance business with one provider: Swiss Re. Visibly and in addition we keep more free capital at the holding company level, at some short-term cost to you, our shareholders. We however are convinced that this strong capital position and the resulting financial flexibility is of great value in the longer term. It is there for the moment it can be deployed with great benefit for both the client and for you.
business. We are enthusiastic about our clients and will continue to be so. This allows us to fix problems with our clients instead of abandoning them at a crucial moment. Our portfolio of reinsurance business is therefore superior in quality.
A strong 2015 performance and a new strategic framework set the foundation for 2016 and beyond.
Dear shareholders, Since Swiss Re was founded in 1863, we have managed risk and absorbed extreme events in many forms. From earthquakes to terrorism, we have enabled society to thrive and progress. However, protection alone is not enough — resilience is our ultimate goal. This vision permeates our daily actions and continues to inform our strategy.
our 2011–2015 group financial targets 700 bps above risk free average over five years 10% average per share growth plus dividends over five years 10% average annual growth rate, adjusted for special dividends earnings per share (in USD*)
Property & Casualty Reinsurance portfolio delivers; Life & Health Reinsurance meets target The underwriting performance of P&C Re remained solid in 2015, generating USD 3.0 billion in net income and reflecting the underlying quality of our portfolio, as well as a relatively benign natural catastrophe experience. L&H Re has met the return on equity target we set for it at the June 2013 Investors’ Day, in turn delivering a strong net income of USD 939 million.
“ We remain confident that we will continue to capture attractive business opportunities.”
Looking at 2016 and beyond, our new Group targets are focused on profitability and economic growth.
The ‘over the cycle’ timeframe provides a longterm goal, without being distorted by outlying years.
No strategic framework can be put to good use without the help and dedication of our people. We need our employees’ enthusiasm and commitment to bring our vision closer to reality. We’d like to thank them for their hard work: without them, we couldn’t celebrate another successful year.
A framework that will drive our 2016 priorities and create long-term value for our shareholders.
Each Business Unit has its own targets to contribute to the overall goal.
Economic net worth per share 10% growth per annum, using year-end ENW plus dividends, divided by previous year-end ENW.
We have a defined target portfolio of asset and liability risks. Risks can always be added to this target portfolio, and they may also be withdrawn.
Flexible capital allocation among these portfolios — and taking advantage of the diversification benefits — is what drives value creation at Swiss Re. We aim to make our decisions based on capital usage and returns from each portfolio, balancing cash flow, Economic Value Management (EVM) and US GAAP metrics.
New markets, new clients and new risks: these are the three primary ways to achieve this strategic objective. We aim to generate 30% of premiums and fee income from targeted high growth markets by 2020. We also aim to serve broader client segments, such as expanding our regional and national insurer client base and even expanding to work with governments and multilateral institutions. We can also find new opportunities — helping clients deal with new risks such as cyber threats or taking on different risks through our investments, such as infrastructure debt.
This strategic focus goes beyond talent and geographies. Smart analytics and cognitive computing, for example, have the potential to change our industry. Our initiatives focus on concrete applications with direct business impact, such as in sales and contracts.
Financial strength, client relationships, and being a knowledge company are the main components of our differentiation. All three have underpinned our strong performance. They remain pivotal going forward. Our clients take comfort in our financial strength. This helps form direct client relationships through which we can deliver large and tailored transactions. As part of our offer we bring top talent and a deep understanding of market dynamics — the practical benefit of being a knowledge company.
Finding new clients and new risks 1 STRATEGIC OBJECTIVE ONE Systematically allocate capital to risk pools / revenue streams
One way to access new risks is by working with new clients — such as in partnership with governments and multilateral institutions.
Since 2011 our Global Partnerships business has closed more than 200 transactions on behalf of these clients, often giving protection to risks that had either been under-insured or completely uninsured previously. In 2015 we helped protect people from drought in Africa, hurricane in the US and Caribbean, earthquake in Turkey and floods in the UK — to name only a few. See also page 18.
Smart analytics and cognitive computing are key tools for optimising the way we work and driving a competitive edge across our businesses.
new arrangements and fresh thinking can bring more people under the scope of insurance protection.
the business of risk istanbul is a city of 14 million people that generates a substantial portion of Turkey’s gdP. The northern Anatolian Fault line runs a few miles south, putting istanbul at constant risk of a devastating earthquake. The Turkish government has been continuously investing to enhance the country’s resilience. one outcome has been the creation of the Turkish Catastrophe insurance Pool (TCiP) in 2000, which provides homeowners with compulsory earthquake insurance. in addition to the continuous support we provide through traditional reinsurance, in 2015 Swiss Re Capital Markets co-structured a USd 100 million catastrophe bond sponsored by the TCiP. Covering istanbul’s large metropolitan area, the three-year bond has a parametric trigger that will pay out if the specified earthquake conditions are met. it was well received by investors and ensures that TCiP will have access to additional reconstruction funds in the event of a major earthquake. Thanks to TCiP, about 40% of Turkey’s homeowners already have earthquake insurance today and more will be covered in the coming years. Such innovation is exactly what’s required to close the world’s protection gap.
What are protection gaps? we are surrounded by risks that are insurable in principle but which go uninsured in practice — leaving a protection gap. natural catastrophes offer the most glaring examples. only 30% of disaster losses have been covered by insurance over the last 10 years. over that period an astounding USd 1.3 trillion in property losses were left uninsured — losses borne by governments, businesses, and individuals. There are also protection gaps in life and health that also undermine society’s resilience (see page 24), as well as risks to property far below the threshold of natural catastrophes. To close these gaps we are taking insurance where it is needed most, including in the world’s most advanced countries.
Read more online: reports.swissre.com 18 Swiss Re 2015 Business Report reports.swissre.com
Affordable solutions Around 18% of adults in Australia don’t have access to financial services, and an even higher percentage lack insurance to protect their belongings. To address the needs of this population, Swiss Re teamed up with Suncorp to provide affordable products to those with low financial means.
normally economies and insurance grow hand-in-hand. As the tragic explosion in Tianjin suggests, there’s danger when the two get out of sync. The central government is well aware. in 2014, they set targets for insurance penetration, aiming to more than double insurance premiums per capita from USd 235 in 2014 to USd 571 by 2020 (the advanced market average is USd 3 621). This sends a powerful signal to both insurers and clients: risk management is a priority for China.
Today the Chinese non-life market is dominated by motor insurance, and the life market is still relatively undeveloped. Yet there is more to the opportunity than simply offering the same support we offer elsewhere. we can also tackle new risks and pioneer new methods, and thus make China a model for the world.
Percentage of premiums and fee income Swiss Re aims to generate in high growth markets, including China, by 2020
“ Swiss Re gave me a start in the US and a role in advancing our high growth market strategy.“
we anticipate equally strong demand for private health insurance that can supplement public health care. By surveying around 3 000 respondents, we gathered valuable insights into the key factors driving Chinese consumers’ willingness to pay for such insurance. we’re sharing the results with our clients to help develop suitable, sustainable products. Such knowledge-sharing confers advantages to both our clients and society as we deal with the consequences of living longer lives.
Innovation for farmers we are also learning how to make more risks insurable. Cotton farmers in Xinjiang, for example, have been vulnerable to cold weather. This risk is not covered by traditional agriculture insurance schemes due to the complexity of underwriting it. in 2015 we piloted the country’s first low-temperature weather index insurance programme to solve this problem. if successful, the programme will be expanded to cover the entire region, which produces more
Closing this gap is partly a matter of consumer education, and also a matter of distribution — putting the solutions in front of the people at risk. Here technology is on our side. To help meet the challenge we tailored our online life underwriting tool, Magnum Mobile (see page 29), for our clients’ agents in 2015. in its first five months this tablet-based solution has already helped insure more than 1.4 million lives. This is a promising illustration of how technology will revolutionise the life insurance industry — and, hopefully, help close the global mortality gap.
than 3 million tonnes of cotton per year. Such index insurance schemes (which automatically pay out when a given measure, such as temperature, falls above or below a specified threshold) can work for other crops, as well as for other perils, such as wind and rainfall. indeed we have recently extended the concept to aquaculture, covering the production of millions of tonnes of fish, scallops, shrimp and other species from wind and other perils. we are also developing a similar programme for farmers in Heilongjiang, China’s biggest crop-producing province, following the Memorandum of Cooperation we signed with the local government in 2015.
Such accomplishments bear testimony to our vision to offer protection to those who need it but we haven’t yet reached.
AdP participants Liangchen wang, Alia Hasbullah and Poppy Cai meeting in our FT. wayne, in (US) offices
China and other high growth markets play a key role in our growth plans. we operate in a technical industry and the core of our activity is measuring and managing risk and uncertainty. To do that, we need qualified talent, such as actuaries. These roles are especially in demand in emerging countries, and are location-specific due to the nature of the business.
Suitable candidates take part in our Actuarial development Programme (AdP). The programme offers these students the possibility to train in a Swiss Re office in the US, take their actuarial exams and learn how the company works. They are paired with mentor/managers once they return to their home countries to ensure they fully integrate what they’ve learned with local markets and our strategies to serve them. The programme is a true win-win in helping us achieve our goals in some of the world’s most promising markets and regions.
Running like clockwork in a digital age Since the days of coal and steam, the Swiss rail system has been famously efficient and reliable. in the age of drones, autonomous cars and cyber attacks, how does operator SBB maintain that reputation? For starters, they consider even the most far-flung scenarios. with a new cover, Swiss Re Corporate Solutions offers SBB protection for imminent natural catastrophes, such as floods or falling rocks as well as failure of iT systems, including cyber attacks and other remote risk scenarios.
The SBB cover is the largest cyber deal Swiss Re has ever carried out. it protects our client in the event that its iT systems become unresponsive due to malicious software attacks. in the case of a large transport operator, the ramifications of a system failure can be daunting.
” we started with a vision and an idea. with Swiss Re Corporate Solutions, we could actually bring this to fruition. The forward thinking and openminded collaboration in that process has been enriching and inspiring for all involved.”
we are engaging not only with clients but peers, regulators, and other partners — especially partners whose digital expertise can help us move to the next phase and maintain our reputation as the world’s leading re/insurer.
This year we teamed up with iBM to develop a range of solutions that rely on iBM watson’s cognitive computing technologies for our Life & Health underwriters.
Today, with information disseminated in real time on tablets and smart phones and purchase decisions only a click away, it’s important for businesses to connect with customers in the same way. is the insurance industry ready for this change? new China Life is. Their agents now have Magnum Mobile built into a powerful point-of-sale tablet that can instantly tap the power of Swiss Re underwriting. A simplified digital application and streamlined process make it easy for agents to collect customer information, submit it from anywhere and receive an immediate decision. The tool helps increase consistency in underwriting decisions and improve processing rates, but most importantly, it provides new China Life with real-time data and analytics to better understand, evaluate and manage the business they are writing. Swiss Re’s Robert Burr, Head of Life & Health, Asia said: “China’s sheer size and fast- changing dynamics are accelerating the effects of digital transformation. insurers have to adapt quickly. we can leverage the experience and solutions we’re developing here to help insurers all over the globe.” 10 billion Mobile devices in use by 2020
1. Walter B. Kielholz 2. Renato Fassbind 3. Mathis Cabiallavetta 4. Raymond K.F. Ch’ien 5. Mary Francis 6. Rajna Gibson Brandon 7. C. Robert Henrikson 8. Hans Ulrich Maerki 9. Trevor Manuel 10. Carlos E. Represas 11. Jean-Pierre Roth 12. Philip K. Ryan 13. Susan L. Wagner
Changes in 2015/2016 No changes have occurred in the composition of the Group EC during 2015.
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.
Tokyo Otemachi First Square 9F 5–1 Otemachi 1 chome Chiyoda-ku Tokyo 100-0004 Telephone +81 3 5219 7800
Photography: Geri Krischker (p. 4, 8, 30, 31) Tom Galliher, Galliher Studio (p. 22, 25)
In a challenging business environment, our Group earned a strong 2015 net income of USD 4.6 billion.
Combined ratio in % 83.7 86.0 Return on equity1 in % 26.7 22.2
Corporate Solutions Net income attributable to common shareholders 319 340 7
Net premiums earned and fee income by region (Total USD 30.2 billion)
“ Three things set us apart: capital strength, client relationships and knowledge.”
The conundrum: lower prices, but ever-higher margins and less demand In 2015 we again observed high margins, and as a consequence high returns. The most significant were in Property & Casualty Reinsurance, but also in our life and health businesses, which have recovered from difficult results the year before.
What leaves me perplexed is, in addition, that our clients (the insurance industry and large corporate clients) are not taking advantage of this market. Quite the opposite: the lower prices get, the less reinsurance cover they buy. This is a period of high uncertainty (just to mention some: climate change, geopolitical security challenges, technology developments with huge consequences, economic growth is very unstable, and financial markets face the biggest monetary policy experiment ever). So what should a company like Swiss Re do in this situation?
Therefore we have presented an update last December on the strategic direction and priorities which should allow us both to succeed in the short term and not lose sight of long-term strategic direction.
Capital allocation matters, we all know that. But you have to be in a position to actually execute on your analysis. In this respect the reinsurance industry is in a better situation than primary insurers, who have to invest significantly in building the infrastructure in markets they operate in. Their flexibility is limited. Reinsurance on the other hand can react fairly quickly, not only on the asset side, but also on the underwriting side of the house. So we’ll aim to take advantage of this and be quick on our feet.
Therefore for us it is of vital importance: don’t let traditional distribution channels make efficient capital allocation impossible. Swiss Re has to have access to the risks it wants to underwrite. In this context we have built our Global Partnerships business, which is trying to develop opportunities with governments and supranational institutions. And we have just created our Life Capital Business Unit, which is underwriting individual and group life risks through and with the help of distribution partners or by acquiring closed life books.
Clients in reinsurance are partners. Our clients regularly put us at the top of the league tables as best reinsurer, in all parts of the world and nearly all lines of business. We are enthusiastic about our clients and will continue to be so. This allows us to fix problems with our clients instead of abandoning them at a crucial moment. Our portfolio of reinsurance business is therefore superior in quality.
And last but not least: we are here to develop the body of knowledge available within the firm and share it with our clients. This allows us to develop better products with and for them and allows us to learn from each other. We spend a significant amount for research both at the product development level and at the portfolio level, supporting our capital allocation. It might lead to a higher operating cost than some of our peers have. But it should also lead to overall higher margins. No surprise. It would be strange if superior insight were not relevant to risk underwriting and investment decisions.
The good news is that we have a highly qualified successor. In Christian we have a candidate who can both transition smoothly into this new role and who brings an intimate understanding of our Group’s strategy. Christian has been with us for 17 years, and for nearly the last five, as CEO of Reinsurance, and therefore responsible for approximately 85% of our revenue. He has been the driving spirit behind P&C Re’s continued outperformance and a key figure in getting L&H Re back on track. His nomination demonstrates both the depth of Swiss Re’s talent and the importance of maintaining Swiss Re’s distinctive culture. I wish Christian every success in the new role.
It also contributed to our success in 2015: I am very pleased to report that we managed to navigate the challenging environment and can report another positive set of results, driven by strong performances from all three of our Business Units. Group net income reached USD 4.6 billion — one of our highest ever — up from USD 3.5 billion in 2014. These results clearly differentiate us in the industry. With the updated strategic framework we unveiled in December 2015, we believe we are well placed to continue to focus on profitable growth, strong capitalisation and unique client experience.
Corporate Solutions continues to deliver in challenging market conditions and remains committed to disciplined underwriting, generating USD 340 million of net income for the year. The focus on high growth markets is as strong as ever, notably with the acquisition of Sun Alliance Insurance China Limited, which enables us to operate in mainland China, one of the world’s most promising markets.
Our 2011–2015 Group financial targets 700 bps above risk free average over five years 10% average per share growth plus dividends over five years 10% average annual growth rate, adjusted for special dividends
amid challenging conditions we had a strong performance in 2015, delivering a strong net income of USD 4.6 billion and setting a path for the future by updating our strategic framework.
economic performance in emerging markets was disappointing overall but varied across regions. china’s economic growth in 2015 fell almost one-half percentage point below the level of 2014, driven by lower exports and modest investment growth. india’s performance was stronger, with business and consumer sentiment improving significantly on expectations of a strong push towards economic reform and liberalisation. india was the world’s fastest-expanding large economy in 2015.
Growth in latin america was disappointing with deep recessions in Brazil and Venezuela and below-trend growth in the rest of the region. Brazil’s economy contracted by more than 3%, suffering from lower consumer spending and a large drop in investments. The Mexican economy was hampered by low industrial activity and falling oil and gas production while private consumption remained healthy. in Southeast asia, economic activity was robust, with strong growth in the Philippines, Malaysia and Vietnam. in contrast, russia’s economy fell into a deep recession due mainly to low oil prices and sanctions.
Major economies in africa and the Middle east developed unevenly, driven largely by political developments and lower oil and commodity prices. Growth in South africa was sluggish, as companies dealt not only with lower commodity prices but also with weak domestic and foreign demand, electrical outages, union actions and rising input costs. Saudi arabia experienced solid growth, though the central government’s fiscal balance deteriorated sharply due to lower oil prices.
Global growth improved in 2015 but developed unevenly across regions. The US economy grew at a solid pace, while growth in china slowed. Monetary policies of major central banks remained accommodative and government bond yields were low. equity markets performed moderately in the first half of the year and declined in the second half.
Market expectations for the interest rate hike kept yields for US and UK ten-year government bonds about 1.5 percentage points above German and Japanese bond yields. Despite the start of monetary policy normalisation in the US, interest rates remained historically low in the advanced economies (including the US).
in an attempt to contain inflation and to stop the depreciation of the real, Brazil increased its interest rate to double digits, while china and india both reduced rates.
Stock market performance Global stock market performance was mixed: the US S&P 500 was down 1%, the Swiss Market index 2% and the MSci UK 6%. The Japanese TOPiX was up 8% and the euro Stoxx 50 4% (see stock markets chart). after three years in which major markets ended in positive territory, equity market development slowed down due to increased uncertainty, weak profit growth and investors caution.
– United States (S&P 500) – United Kingdom (MSci UK) – DJ euro STOXX 50 – Japan (TOPiX) – Switzerland (SMi) Source: Datastream
 United States  United Kingdom  Germany  Japan  Switzerland in %
Economic indicators 2014–2015 USa eurozone UK Japan china 1 yearly average 2 year-end 3 USD per 100 units of foreign currency
1 “low for long? causes and consequences of Persistently low interest rates,” October 2015, international center for Monetary and Banking Studies (icMB) and centre for economic Policy research (cePr).
These risks would affect re/insurers mainly via adverse asset price movements and slower growth potential in the affected markets. in addition, a “flight to quality” could lead to a drop in interest rates and exacerbate the challenges from the current low yield environment.
While recent low interest rates are primarily connected to the financial crisis, the decline in both short- and long-term yields had already started in the 1980s. a number of economists attribute the current low yield environment not only to the financial crisis and its aftermath but also to this long-term trend towards lower equilibrium rates. This trend is associated with both a decline in real interest rates (nominal interest rates adjusted by inflation expectations), and also with lower inflation expectations. However, there is no consensus on the equilibrium real interest rate nor why it has been declining.
While a frequently mentioned determinant of long-run trends in real interest rates is economic growth, the relationship is more tenuous than widely believed. a recently published Geneva report on the World economy1 mentions other key factors. an ageing population in most parts of the world led to an increase in the aggregate propensity to save, some of which went into fixed income assets, lowering interest rates. another contributing factor has been the increase in chinese savings. The higher savings levels, coupled with china’s increased financial integration, led to large capital outflows into global financial markets. Finally a shift in investor preferences away from risky assets towards safe bonds is another likely driver for lowering interest rates.
Market performance Primary non-life premium growth was slower in 2015 than in 2014, in both advanced and emerging markets. Global primary non-life premiums are estimated to have risen by 2.5% in real terms in 2015, after a 2.8% increase in 2014. However, in US dollar terms, premium income declined by almost 4% as many currencies weakened against the US dollar (see section on macroeconomic developments).
Underwriting results in Japan and australia, the biggest mature markets in asia Pacific, have been mixed this year. in Japan, overall underwriting results improved across all lines, although the combined ratio in the compulsory motor line remains high. Underwriting performance in australia, however, deteriorated due largely to poor property risk (homeowners, fire & industrial special risks) offsetting improvements in com- pulsory motor. The voluntary motor and liability lines have been relatively stable.
Outlook The global economic outlook for 2016 and 2017 is more positive and demand for primary non-life insurance is expected to increase. The emerging markets will be the main driver with an estimated strong improvement to 8%–9% premium growth in real terms expected in 2016 and 2017. Growth in mature markets is expected to slow slightly since rates are expected to moderate further and macro conditions will only improve modestly. Global premium growth is forecast to improve from 2.5% in 2015 to 3.0% in 2016 and 3.2% in 2017.
2 000 Market size in USD billions estimated global premium income in 2015
−4% Market performance estimated global premium growth in 2015 for motor insurance, while the Spanish and Portuguese markets are coming off their lows. larger markets with accelerating growth include Japan, South Korea, Spain and the netherlands.
Primary non-life premiums in the emer- ging markets grew by an estimated 5.6% in 2015, also slower than in previous years. This was mainly due to economic slowdown in latin america and central and eastern europe. However, there was strong growth in emerging asia (12%) and in china in particular, based on strong demand in motor. Premiums in other emerging asia markets, and in the Middle east and north africa, grew by around 6%. in Sub-Saharan africa, premiums were up 4.5%.
in terms of underwriting profitability, the US P&c industry’s combined ratio deteriorated slightly from 97% in 2014 to 98% in 2015, while again aided by comparably low catastrophe losses, claims costs in motor insurance, both personal and commercial, and in general liability were incrementally rising again.
Market performance non-life reinsurance premium growth was about -5% in US dollar terms, impacted mainly by adverse currency developments. However even in real terms, revenue growth was strongly limited by soft reinsurance market conditions and weak premium growth in the primary market (see above). reinsurance prices have been softening since US property catastrophe rates started to weaken in mid-2013. This trend has since spilled over into other lines of business. in general, rates in casualty have been more stable than in property.
One important source of capital in the non-life reinsurance segment and a contributor to the softening of the market has been the expansion of alternative capacity (ac) into the peak risk segment of the industry. By end of 2015, aggregate capacity of ac amounted to USD 65–70 billion, equivalent to a 16% share of the global property catastrophe market. However, after three years of rapid expansion, the development of ac moderated, as risk spreads declined in parallel with the softening of rates in the traditional sector.
Market overview The global life insurance industry generated about USD 2 500 billion in premium income in 2015, of which 17% came from emerging markets. around 85% of premium income in life insurance derives from savings and retirement products. The protection business, which covers mortality and morbidity risks, has a declining share of premium income.
Outlook There is significant potential for sales growth in mortality and health protection given the large protection gap in many markets and growing consumer awareness of underinsurance. Downside risks from the modest global growth outlook, persistently low interest rates, volatility in financial markets and regulatory changes remain significant in the short to medium term. Global real premium income is forecast to rise by 4% annually in both 2016 and 2017.
2 500 Market size in USD billions estimated global premium income in 2015
life insurance is a long-term business and new business is an important contributor to industry growth. new business in seven major markets representing about 60% of global premium income is expected to have risen by 2% in 2015 (after inflation), following a 9%-increase in 2014. The more modest increase this year was mainly due to improving sales of protection products in most markets. in the US, sales of term insurance products increased 2% in the first half of 2015, after declining slightly in the previous year. Sales of disability insurance have improved also, while new business demand for long-term care continued to weaken due to higher prices. in canada, term sales recovered modestly (up 3%) in the first half of 2015 after a dip in 2014.
Market overview The size of the global life reinsurance business was around USD 65 billion in 2015. Most (70%) of this stems from the US, canada and the UK. ceding companies from emerging countries accounted for only 6% of global demand. life reinsurers are increasingly diversifying away from traditional mortality business.
Outlook Traditional life reinsurance is expected to continue to stagnate in the next few years, driven by ongoing contraction of this segment in the US and UK, while other mature markets will record moderate growth in line with the growth of protection business on the primary side. in emerging markets, life reinsurance is expected to increase by about 6%‒7%. By contrast, the pressure on a number of primary life insurers will likely generate steady demand for capital solutions and other forms of non-traditional reinsurance.
Group strategy a strategy to help meet our financial targets and to make the world more resilient.
Over the past five years our strategy has worked — and now we have the chance to build on it.
at our December 2015 investors’ Day we introduced the next phase in our Group’s strategic framework. it has four key areas, each of which we will emphasise even more strongly to better position ourselves for continued success.
i. Systematically allocate capital to risk pools/revenue streams iV. emphasise differentiation ii. Broaden and diversify client base to increase access to risk iii. Optimise resources and platforms to support capital allocation
Swiss Re 2015 Financial report 23 return on equity at least 700 basis points greater than the risk-free rate, as measured by ten-year US government bonds.
We have a defined target portfolio of asset and liability risks. risks can always be added to this target portfolio, and they may also be withdrawn.
new markets, new clients and new risks: these are the three primary ways to achieve this strategic objective. We aim to generate 30% of premiums and fee income from targeted high growth markets by 2020. We also aim to serve broader client segments, such as expanding our regional and national insurer client base and even expanding to work with governments and multilateral institutions. We can also find new opportunities — helping clients deal with new risks such as cyber threats or taking on different risks through our investments, such as infrastructure debt.
net income for reinsurance was USD 3.9 billion in 2015, compared to USD 3.1 billion in 2014. Property & casualty reinsurance contributed USD 3.0 billion, a modest decrease from the prior-year period, reflecting continued solid underwriting performance supported by benign natural catastrophe experience and favourable prior-year development. life & Health reinsurance reported net income of USD 939 million, reflecting a strong operating result, net realised gains and lower interest charges, compared to a loss of USD 462 million for 2014, which was mainly due to management actions addressing the pre-2004 US individual life business.
admin re® reported net income of USD 422 million for 2015, compared to USD 34 million for 2014, driven mainly by higher realised gains, favourable UK linked investment performance and one-off tax benefits, partially offset by costs for the acquisition of Guardian Financial Services. The 2014 result was impacted by the loss of USD 203 million on the sale of aurora national life assurance company (aurora).
Premiums earned by Property & casualty reinsurance in 2015 were USD 15.1 billion, compared to USD 15.6 billion in the same period last year. at constant exchange rates, premiums earned increased by 3.4%, driven by increased premiums in casualty and specialty, partly offset by decreases in property. The Property & casualty reinsurance combined ratio was 86.0% in 2015, compared to 83.7% in 2014. Both periods benefited from a better than expected natural catastrophe experience and favourable prior-year reserve developments.
life & Health reinsurance premiums earned and fee income were USD 11.0 billion, compared to USD 11.3 billion in 2014. at constant exchange rates, premiums and fees increased by 6.1%. The operating margin for life & Health reinsurance was 9.9% in 2015, compared to 2.6% in 2014, mainly reflecting the improvement in operating income in both life and health segments.
The Group reported non-participating net realised investment gains of USD 1.2 billion for 2015, compared to USD 567 million for 2014. The current period result was primarily driven by sales of government bonds and equity securities, partly offset by impairments.
Net premiums and fees earned by Business Unit, 2015 (Total: USD 30.2 billion)
50% P&c reinsurance 36% l&H reinsurance 11% corporate Solutions 3% admin re®
Underwriting, a source of competitive advantage re/insurance is a knowledge business. as the expected profitability of individual risks can vary widely, superior risk selection is key to outperformance. To deliver such outperformance Swiss re relies on highly developed underwriting expertise, cutting-edge capabilities in data analytics, more than 150 years of experience, and sufficient scale to invest in research and development, all of which are aimed at creating a competitive advantage.
Both periods benefited from a lower than expected level of natural catastrophe losses. The 2015 natural catastrophe loss burden amounted to USD 0.2 billion, significantly below the expected value of USD 1.7 billion, while the 2014 burden amounted to USD 0.5 billion, also significantly below the expected value of USD 1.6 billion. The largest natural catastrophe losses in 2015 were caused by the floods in chennai, india, and storms on australia's east coast.
inflation is currently well contained and will continue to keep property and casualty claims severity increases generally low for a while. The long-term outlook for inflation is more uncertain.
For more on the underwriting performance of all Business Units, see pages 34‒45.
Market environment Hedge funds, pension funds and other capital market participants have been supplying ‘alternative’ capital to re/insurance markets in recent years as they search for higher returns. Primary insurers are also by and large well-capitalised after several years of generally benign loss experience, leading some of them to retain more risk than has normally been the case.
These forces have been depressing prices, especially in short-tail lines, making disciplined and selective underwriting ever more critical for re/insurers. For the January 2016 renewals we observed a continued general price softening in property and specialty lines of business. casualty has been relatively stable, with significant differences by segment. The softening in the important US natural catastrophe market has started to ease and there is evidence that it is approaching an inflection point.
Financial markets overview During the first half of 2015, equity prices held up well while government bond yields moved higher and credit spreads widened driven by heavy supply. The risk of Greece leaving the eurozone resulted in significant market nervousness around mid-year. additionally, the surprise change in the chinese exchange rate regime in august, amid already growing concern about economic slowdown, significantly influenced market sentiment and pushed equity market volatility to its highest level since the eurozone crisis began in 2011. Sentiment subsequently recovered in the final quarter of the year.
against this backdrop, the Group will seek to maintain a balanced and high-quality investment portfolio. The acquisition of Guardian Financial Services is expected to increase the Group’s overall allocation to credit by approximately 6%, consistent with the change in admin re®’s investment portfolio and business mix. The quality of the credit portfolio remains high.
Unprecedented official policies have helped to restore financial market stability. However, more than seven years after the financial crisis it is questionable whether the benefits still outweigh the costs, such as asset bubbles, economic inequality, reputational damage for central banks and a “tax” on savers. Swiss re has identified three policy areas where reform could mitigate these effects and significantly enhance the long-term growth outlook.
The first is to strengthen private capital market intermediation. in the eU up to 80% of financial intermediation takes place through banks, which due to regulatory pressure have been reducing their balance sheets. This directly impacts their ability to lend, with clear implications for growth. Furthermore, the significant central bank holdings of various debt securities has created significant price distortions.
The second area is public sector support for the development of tradeable asset classes, specifically in relation to infrastructure investing. in 2013 just 24% of infrastructure finance was through tradeable project bonds with the rest in illiquid bank loans. Greater emphasis on project bonds in tradeable form, achieved with standardisation, as well as strengthening investor rights more generally to tackle well-known policy risks, would significantly enhance accessibility of the asset class.
Finally, a conducive regulatory and policy environment would allow long-term investors to exert their natural role of acting as a financial market stabilizer and channel funds to the real economy. Policymakers need to prevent short-termism and support economic growth and job creation. The table below shows that long-term investors hold assets worth 91% of global GDP, giving them the potential to be key financiers of growth and development projects.
̤ On securitisation, the cMU has proposed a new regulatory framework, aimed at rebuilding trust in the market and improving the financing of the eU economy.
While these initiatives are very welcome, there remain significant policy changes which could help mitigate the effects of financial repression and promote a more resilient and sustainable growth outlook.
Europe % of global * includes insurance companies, pension funds, sovereign wealth funds, endowments and foundations.
Deferred acquisition costs and other intangible assets 8 137 8 435 4
Liabilities and equity Unpaid claims and claim adjustment expenses 57 954 55 518 –4 liabilities for life and health policy benefits 33 605 30 131 –10
Funds held under reinsurance treaties 3 385 3 320 –2 income taxes payable 909 488 –46 Deferred and other non-current taxes 9 445 8 093 –14 accrued expenses and other liabilities 6 873 7 948 16 non-controlling interests 111 89 –20
We allocate capital to the most attractive lines of business and steer it toward the business that is most relevant for our clients. We have been emphasising transactions, which are tailored, complex solution structures that efficiently fit client needs and bring unique added value. Demand for such structures is being driven especially by more stringent solvency and capital standards, often in l&H.
Broadening and diversifying our client base to increase access to risk We have continued to work on expanding our client base through a dedicated focus on specific client segments (such as regionals and nationals, or r&n), lines of business (such as casualty and health) and geography (especially high growth markets).
in casualty, we proactively manage our business according to the cycle, aiming for a disciplined expansion. Growth has been significant since 2011, particularly in the US. at the same time we make significant investments to understand the impact of new risks in the casualty book, such as cyber risks or driverless cars; furthermore, our liability risk Driver (lrD) model gives us a new way to systematically, objectively, and transparently assess liability risks.
Emphasising differentiation Differentiation in reinsurance is based on financial strength, strong client relationships and our knowledge company approach. Our financial strength is reflected by the ratings on page 54. Our close relationships allow us to better understand clients’ needs through regular exchange with key decision makers and tailor solutions specifically for them. as a result we achieve remarkable client retention and premium growth. Today clients rank Swiss re first or second in all markets except in latin america, where we rank third, according to Flaspöhler ratings.
Such relationships are supported by our knowledge company approach, which allows us to deliver a wide spectrum of products and services. We help our clients grow through, for example, new or co-product development, portfolio/risk analysis, catastrophe modelling advisory, Solvency ii consulting and rating exposure support. We also share knowledge with our clients through client workshops and training — in 2015 we delivered on-site client training for more than 600 participants from over 40 countries and for more than 800 others through elearning. We also provide unique systems and simulation tools to clients, such as catnet, a natural hazard information and mapping system; Swiftre, our online self-service facultative reinsurance platform; and Magnum, our automated underwriting system for l&H.
The underwriting result for 2015 decreased by USD 433 million largely due to the impact of foreign exchange rate movements and lower prices for reinsurance. This also reflects a shift towards more proportional business and more casualty business, both of which typically result in a higher combined ratio. These shifts were partly offset by better than expected natural catastrophe experience and positive prior-year development.
Major natural catastrophes in 2015 included storms on australia’s east coast, storm niklas in europe, a sandstorm in Saudi arabia, and floods in india and the UK in December. large man-made losses included the explosion in Tianjin, china, a fire on an oil platform in the Gulf of Mexico, a dam burst in Brazil, a credit loss in india, an engineering loss in France and a fire at a South Korean warehouse.
Net premiums earned net premiums earned were USD 15.1 billion in 2015, compared to USD 15.6 billion for 2014. The decrease was mainly driven by foreign exchange rate movements. at constant exchange rates, premiums earned increased by USD 497 million, driven by increased premiums in casualty and specialty, partly offset by decreases in property.
Administrative expense ratio The administrative expense ratio increased to 8.3% in 2015, compared to 7.5% in 2014. The prior year ratio benefited by one percentage point due to a release of a premium tax provision in asia in the third quarter of 2014.
Casualty The casualty combined ratio for 2015 was 99.9%, compared to 104.1% in 2014. This is mainly due to higher net reserve releases compared to last year.
Specialty lines The specialty combined ratio increased to 80.5% in 2015, compared to 68.1% in 2014, reflecting the impact of the explosion in Tianjin, china, and significantly lower net reserve releases compared to 2014.
Total expenses before interest expenses –13 050 –12 975 –1 net realised investment gains/losses 699 445 –36 Other revenues 69 45 –35 interest expenses –255 –262 3 Income before income tax expense 4 137 3 440 –17 income tax expense –552 –443 –20 income attributable to non-controlling interests –1 –1 0 interest on contingent capital instruments –20 –19 –5 Net income attributable to common shareholders 3 564 2 977 –16 claims ratio in % 54.5 52.3 expense ratio in % 29.2 33.7 combined ratio in % 83.7 86.0
Investment result The return on investments for 2015 was 3.5% compared to 3.7% in 2014, reflecting a decrease in the investment result of USD 212 million. The decrease was driven by reduced net realised gains from the sale of equity securities in the current period.
Successful differentiation will remain the key for new business wins, large and tailored transactions and differential pricing.
Premiums earned by line of business, 2015 (Total: USD 15.1 billion)
Our differentiation strategy is successful and well-acknowledged by our clients. We continue to execute this strategy while focusing on the bottom line in a softening market environment. We will reduce capacity for flow business and focus on large and tailored transactions.
Property & casualty reinsurance has consistently outperformed the market. combining the results from Swiss re and six of our peers, the results show that we have extracted a higher share of the industry’s profits than our market share would suggest — meaning principally that solid underwriting has been a key driver of shareholder value.
This also applies, coincidentally, in 2011, when our industry experienced extraordinarily high natural catastrophe losses but the impact on Swiss re was relatively smaller compared to peers.
Net premiums earned and fee income net premiums earned and fee income decreased by 2.7% to USD 11.0 billion in 2015, compared to USD 11.3 billion in 2014. at constant exchange rates, premiums earned and fee income were 6.1% higher in 2015. The 2015 figure benefited from several longevity deals in the UK, and large transactions in australia, europe and South africa contributed towards new business growth. in addition, rate increases in the yearly renewable term business in the americas contributed to the 2015 result.
Operating margin ratio The operating margin for 2015 was 9.9% compared to 2.6% for 2014. The higher margin stems from the significant improvement in life and health operating income along with lower premiums earned and fee income. The prior-year margin was substantially lower due to the management actions in relation to pre-2004 US individual life business.
Administrative expense ratio The administrative expense ratio was 7.3% for 2015 compared to 6.9% in 2014 due to an increase in variable compensation.
The 2014 operating income of life & Health does not include the pre-tax charge on the unwinding of the asset funding structure. This charge was included under non-participating realised gains/losses.
Life & Health results USD millions 2014 2015 change in %
Management expense ratio in % 6.9 7.3 Operating margin in % 2.6 9.9
Investment result The return on investments for 2015 was 3.4% compared to 3.2% in 2014, reflecting a lower invested asset base alongside a slight increase in the investment result of USD 2 million. The change in the investment result was driven by an improved result from derivatives and additional gains from sales which were offset by lower net investment income due to net asset outflows from the unwinding of a funding structure in 2014.
net investment income of USD 1.1 billion in 2015 was lower than USD 1.2 billion in 2014 mainly due to net asset outflows related to the unwinding of a funding structure. The fixed income running yield was 3.5% in the reporting period.
net realised gains were USD 85 million in 2015 compared to net losses of USD 72 million in 2014, as the prior year included losses from an interest rate hedge.
Shareholdersʼ equity common shareholders’ equity was USD 5.8 billion at the end of 2015, slightly below the shareholders’ equity at the end of 2014. net income of USD 939 million was offset by unrealised losses, the impact of foreign exchange rate movements and a dividend payment. The return on equity for 2015 was 15.7%. after adjusting for realised gains and one-off model adjustments, and using the equity capital of USD 5.5 billion announced as the basis for our 2015 target at the June 2013 investors’ Day, return on equity was 11.8%, meeting the target of 10%–12%.
Outlook in mature markets, the low interest rate environment will continue to have an unfavourable impact on long-term life business. in addition, cession rates in the US are expected to decrease as primary insurers retain more risk. However, high growth markets will see stronger increases in life and health businesses and primary insurers’ cession rates are expected to be stable. as a result, we expect life and health reinsurance business to be relatively flat in mature markets and to increase in high growth markets.
a significant portion of profits in life and health as with Property & casualty, the data show that life & Health reinsurance retains a significant portion of the industry’s profits. in this comparison with five peers, we have used operating income to measure profits to get around differences caused by accounting treatment.
While the data for 2014 show the impact of our management actions with respect to the pre-2004 US individual life business and the unwinding of an asset funding structure, the results show us quickly back on track in 2015. This year we met the return on equity target we set for ourselves in 2013 of 10%–12%, ending at 11.8% for 2015, using the terms set for that target.
Corporate Solutions corporate Solutions continued to invest in future profitable growth by further expanding its primary lead capabilities and broadening its distribution network.
Strategy and priorities at the Swiss re investors’ Day in December 2015, the corporate Solutions ceO presented the strategic initiatives for growth beyond 2015, communicating the intent to focus on further expansion into primary lead and to broaden the footprint. in 2015, corporate Solutions developed primary lead capabilities and rolled out primary lead products in additional markets across all regions.
in January 2016, corporate Solutions announced the agreement to acquire a leading US employer stop loss underwriter, iHc risk Solutions, llc, subject to regulatory approval. The transaction includes iHc risk Solutions’ operations, its team of experts and business portfolio, including in-force, new and renewal business written with iHc subsidiaries. This acquisition will broaden corporate Solutions current employer stop loss capabilities in the small- and middle-market self-funded healthcare benefits segment.
Lines of business The property combined ratio for 2015 improved by 4.1 percentage points to 77.0%, reflecting continued profitable business performance in most regions and lower large loss frequency compared to 2014. Both periods benefited from the absence of major natural catastrophe losses.
The casualty combined ratio improved by 6.6 percentage points to 104.1% in 2015, mainly due to successful business growth and favourable prior-year development on liability business in north america, partially offset by two large man-made losses.
in other specialty lines, the combined ratio deteriorated by 9.6 percentage points to 110.2% in 2015, mainly due to large aviation and satellite losses.
Expenses claims and claim adjustment expenses –2 054 –1 955 –5 acquisition costs –463 –459 –1 Other expenses –687 –756 10 interest expenses –8 –24 – Total expenses –3 212 –3 194 –1
corporate Solutions offers insurance protection against weather perils and other risks, which are accounted for as derivatives. The insurance in derivative form reported net realised gains of USD 33 million in 2015 compared to USD 53 million in 2014. The 2015 period was impacted by mild weather in December.
Solar-generated energy is environmentally friendly and, potentially, unlimited. But it can not be produced continuously. Fluctuating levels of sunshine mean that photovoltaic power producers may be unable to meet their production plans. as a result, their cash flow may be volatile, which jeopardises the power producers’ ability to meet their financial commitments and secure credit.
The ecM team of Swiss re corporate Solutions developed an innovative solution that may help overcome this problem and successfully offered the product to clients in china. The country’s first solar radiation index transaction helps clients hedge against the risk that solar radiation falls below an agreed level. if it does, the client gets a payment in compensation for lost revenue. The scheme was recognised as the Weather Deal of the year by environmental Finance in 2015.
The solar radiation index solution is just one of the risk-transfer products developed by the ecM team. Similar products help clients in sectors as diverse as food, tourism and power to hedge their exposure to fluctuating supply and demand, and protect their cash flows. Such solutions are of strategic importance as we increasingly record unseasonal weather patterns that can affect many industry sectors.
Strategy and priorities as part of life capital from 1 January 2016, admin re® aims to enhance profitability by leveraging its core competencies of selective growth, value extraction and operational excellence.
admin re®’s strategy of selective growth means pursuing opportunities to build and enhance the franchise in the UK market. all transactions need to meet Swiss re’s Group investment criteria and hurdle rates.
Operational excellence involves continuous improvement of the operating platform. it also means focusing on transformation and management actions, including business efficiency and cost reductions.
For future periods, admin re® will be reported as part of the life capital Business Unit.
admin re® reported net income of USD 422 million in 2015 compared to USD 34 million in 2014. The 2014 result included a USD 203 million loss from the sale of aurora. excluding this loss, the 2014 net income would have been USD 237 million. The increase in the current year was driven by higher realised gains from sales of government bonds as part of the preparation for Solvency ii and tax credits following the finalisation of the UK year-end statutory results and changes to the UK corporation tax rate.
net investment income of USD 656 million in 2015 was lower than USD 901 million in 2014 mainly due to the net asset outflows related to the sale of aurora and the impact of foreign exchange rate movements. The fixed income running yield was 3.6% in the reporting period. net realised gains were USD 264 million in 2015 compared to USD 175 million in 2014, as the current period included additional net realised gains from sales of government bonds related to the preparation for Solvency ii.
Outlook as part of the life capital Business Unit, admin re® will continue to pursue selective growth opportunities in the UK closed book market and potentially in continental europe. all transactions must meet Group strategic and investment criteria as well as hurdle rates. Overall admin re® aims to improve efficiency, to achieve capital and operational synergies and to continue to actively manage its asset portfolios and blocks of business. From 2016 through 2018, life capital aims to generate significant cash for the Group and to invest into its open life strategy.
Revenues Premiums earned 502 368 –27 Fee income from policyholders 453 414 –9 net investment income – non-participating business 1 256 938 –25 net realised investment gains/losses – non-participating business –114 275 – net investment result – unit-linked and with-profit business 1 306 772 –41 Other revenues 1 0 –100
Expenses life and health benefits –1 415 –790 –44 return credited to policyholders –1 442 –1 106 –23 acquisition costs –181 –138 –24 Other expenses –359 –320 –11 interest expenses –25 –16 –36 Total expenses –3 422 –2 370 –31
Introducing Life Capital in October 2015, we announced a new Business Unit, life capital, which is managing closed and open life and health insurance books, including the existing admin re® business, since 1 January 2016. This streamlined approach is helping us diversify our business, generate stable returns and seize new opportunities. For our clients, life capital provides a pool of primary talent and expertise, including new tools and insights to reach new markets and offer new products. life capital gives us a better framework to systematically allocate capital to attractive and growing life and health risk pools.
Share trading The average on-exchange daily trading volume for 2015 was 1.5 million shares. Trading volume peaked at 10.0 million shares on 15 January 2015.
Swiss Re’s dividend policy Swiss re’s dividend policy is a central element of Swiss re’s capital management priorities. The Group aims to ensure a superior capitalisation at all times and maximise financial flexibility, growing the regular dividend with long-term earnings and at a minimum maintaining it. Swiss re will then deploy capital for business growth where it meets its strategy and profitability requirements and repatriate further excess capital to shareholders, with the preferred form of future capital repatriation being share buy-back progammes.
The Board of Directors proposes to authorise the company to repurchase
Weighting in indices as of 31 December 2015 index weight (in %)
Index representation in addition to its relevant industry indices, Swiss re is also represented in various Swiss, european and global indices, including the SMi and the SXiP.
Swiss re is also a member of various sustainability indices, including the Dow Jones Sustainability and FTSe4Good index families. Swiss re has been named as the insurance industry sector leader in the Dow Jones Sustainability indices for 2015. This is the ninth time since 2004 that Swiss re has led the insurance sector in these rankings.
Information for investors More information on Swiss re’s shares is available in the investor relations section on Swiss re’s website at: www.swissre.com/investors www.swissre.com/investors
8 calculated by dividing net income by the weighted average number of common shares outstanding. 9 Based on shareholders’ equity (excluding convertible perpetual capital instruments) divided by the number of external common shares entitled to dividend. 10 Based on shares outstanding. 11 Since 15 June 2015 every Swiss re aDr represents one quarter of a Swiss re share. Prior to close of business on 12 June 2015, one aDr represented one Swiss re share.
Our capital strength and financial flexibility enable us to profitably grow our business within the boundaries set by our risk appetite and risk tolerance.
Our overall goal for capital management is to maintain a capital structure that operates efficiently within the above constraints and maximises our financial flexibility. Our underwriting and investment decisions are steered to make capital and liquidity fungible to the group wherever possible, while complying with local regulations and client needs. Cash dividends paid to the group’s parent holding company, swiss Re ltd, totalled Usd 3.7 billion in 2015.
“ Risk management is key to controlled risk-taking that underpins our financial strength.”
in 2015 we also passed two major milestones in optimising the capital structure of our Business Units and the group: ̤ swiss Re ltd established a
Usd 700 million subordinated debt facility in November 2015, further enhancing the group’s financial flexibility (see page 52).
̤ secondly, we achieved Usd 6 billion of net deleveraging ahead of our 2016 target of Usd 4 billion announced at the June 2013 investors’ day.
Liquidity Our core insurance and reinsurance operations generate liquidity primarily through premium income. Our exposure to liquidity risk stems mainly from two sources: the need to cover potential extreme loss events and regulatory constraints that limit the flow of funds within the group.
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 the swiss Reinsurance Company ltd liquidity pool, the primary liquidity pool of the group, holds surplus liquidity. swiss Re also provides FiNmA with a yearly report on its liquidity position, in accordance with FiNmA’s circular 13/5, “liquidity ‒ insurers”.
Our risk profile in 2015 Throughout 2015, our overall risk exposure increased by 3% to Usd 19.6 billion, compared to Usd 19.1 billion in 2014. The increase was mainly driven by higher financial market and credit risk exposure as a result of the inclusion of guardian Financial services. The agreement to acquire guardian Financial services was announced on 23 september 2015 (subject of regulatory and competition authority clearance). The acquisition was completed on 6 January 2016. As swiss Re applies an economic-based risk and solvency assessment, asset and liability risk impacts of the acquisition are taken into account in 2015.
Risk Management Our proprietary integrated risk model provides a meaningful assessment of the risks to which the group is exposed and represents an important tool for managing our business. it determines the capital requirements for internal purposes and forms the basis for regulatory reporting under the ssT and solvency ii for our legal entities in continental Europe.
Key milestones achieved in 2015 Two further important milestones towards full implementation of the target capital structure were achieved in 2015: in November 2015, swiss Re ltd established a Usd 700 million subordinated debt facility at an attractive interest rate of 5.75%. The transaction establishes a funding platform at the holding company and brings the group closer to its target capital structure objective in contingent capital form, further enhancing the group’s financial flexibility. Unlike previous contingent capital transactions, this platform allows swiss Re to decide when to reinforce its capital position at locked-in rates.
Overall group deleveraging has totalled Usd 6 billion since year-end 2012, and achieved the deleveraging target of Usd 4 billion ahead of 2016. Net senior deleveraging in 2015 amounted to Usd 1.2 billion, driven by Usd 0.7 billion senior debt maturities and redemptions and a net Usd 0.7 billion reduction in lOCs and related instruments, offset by new senior issuances and bank funding of Usd 0.2 billion.
Optimised Group capital structure swiss Re’s level of capitalisation and its capital structure are driven by regulatory and rating capital requirements, and management’s view of risks and opportunities arising from our underwriting and investing activities. As announced at the June 2013 investors’ day, we set a target capital structure objective that aims to operate efficiently within these constraints by maximising financial flexibility. The structure focuses on the reduction of senior leverage, including letters of credit (lOCs), the issuance of contingent capital to replace traditional subordinated debt and extending the group’s funding platform.
̤ First Corporate solutions subordinated debt issuance of Usd 500 million.
Core capital1 senior debt2 lOC3 Total hybrid incl. contingent capital4 senior leverage plus lOC ratio5 (target range: 15%–25%) subordinated leverage ratio6 (target range: 15%–20%) 1 Core capital of swiss Re group is defined as economic net worth (ENW). 2 senior debt excluding non-recourse positions. 3 Unsecured lOC capacity and related instruments (usage is lower). 4 includes subordinated debt facility by swiss Re ltd. 5 senior debt plus lOCs divided by total capital.
6 subordinated debt divided by sum of subordinated debt and ENW.
Achievements since year-end 2012 ̤ letters of Credit reduction of net Usd 2.7 billion. ̤ Usd 4.7 billion deleveraging of senior debt. ̤ Entry into gBp 550 million revolving credit facility for
During 2015, Swiss Re continued deleveraging, maintained its strong capitalisation and further directed excess capital from its Business Units to the Group’s holding company, Swiss Re Ltd.
Continue to implement contingent capital roadmap focusing on Group holding level
✓ subject to FiNmA approval Change since 2012 ✓ significant progress or fully realised Outlook
The group capital structure is comfortably within our senior leverage (15%–25%) and subordinated leverage (15%–20%) target ranges, providing further financial flexibility.
in addition we managed our subordinated debt maturity profile by replacing part of the EUR 1 billion subordinated perpetual loan notes issued by swiss Reinsurance Company ltd in 2006 with new EUR 750 million perpetual subordinated callable loan notes with a first call date in 2025 at a coupon of 2.6%.
Cash dividends paid to swiss Re ltd totalled Usd 3.7 billion in 2015.
Swiss Re Group’s capital adequacy Regulatory capital requirements swiss Re is supervised at group level and for its regulated legal entities domiciled in switzerland by FiNmA. FiNmA supervision comprises minimum solvency requirements, along with a wide range of qualitative assessments and governance standards.
swiss Re provides regulatory solvency reporting to FiNmA under the rules of the insurance supervision Ordinance. This ssT report is based on an economic view. We calculate available capital based on our Economic Value management (EVm) framework and required capital under the ssT using our internal risk model (see pages 55–56 for further information on EVm). The minimum requirement for the ssT is a ratio of 100%. swiss Re’s ssT ratio materially exceeds the minimum requirement.
A.m. Best, moody’s and s&p rate swiss Re’s financial strength based upon interactive relationships. The insurance financial strength ratings are shown in the table below.
On 11 december 2015, A.m. Best affirmed the A+ financial strength rating of swiss Re and its core subsidiaries. The outlook for the rating is “stable”. The rating reflects swiss Re group’s excellent consolidated risk-adjusted capitalisation, strong operating performance and superior business profile as a leading global reinsurer.
On 15 december 2015, moody’s affirmed swiss Re’s insurance financial strength rating and outlook at “Aa3” stable. The rating affirmation reflects swiss Re’s excellent market position, very strong business and geographic diversification and strong balance sheet in terms of capital and financial flexibility.
As of 15 december 2015 Financial strength rating Outlook last update moody’s Aa3 stable 15 december 2015 standard & poor’s AA– stable 30 November 2015 A.m. Best A+ stable 11 december 2015
Best estimates swiss Re values assets and liabilities based on best estimates of underlying cash flows — premiums, claims, expenses, taxes, capital costs, etc — taking into consideration all the information available at inception of a contract. As with other valuation methods that depend on projections of future cash flows, EVm involves a significant degree of judgement in establishing what assumptions should be used. swiss Re actively and carefully reviews its assumptions, seeking both to achieve consistency across business activities and to reflect all available information.
Economic net worth in 2015 Economic net worth (ENW) is defined as the difference between the market value of assets and the marketconsistent value of liabilities. ENW is the EVm measure of shareholders’ equity and the starting point in determining available capital for ssT calculations.
EVM results for 2015 The 2015 EVM Report, showing Swiss Re’s results for the full year 2015, is available on swissre.com/investors/ financial_information
As a re/insurance group, our core business generates liquidity primarily through premium income. Our exposure to liquidity risk stems mainly from two sources: the need to cover potential extreme loss events and regulatory constraints that limit the flow of funds within the Group.
Liquidity risk management Our core liquidity policy is to retain sufficient liquidity in the form of unen- cumbered liquid assets and cash to meet potential funding requirements arising from a range of possible stress events. To allow for regulatory restrictions on intra-group funding, liquidity is managed within groups of entities known as liquidity pools. swiss Re is served by four main liquidity pools representing the parent companies of the group and each of the three Business Units. Each liquidity pool comprises the respective parent company and its unregulated subsidiaries whose funds are freely transferable to the parent company. The amount of liquidity held is largely determined by internal liquidity stress tests, which estimate the potential funding requirements stemming from extreme loss events. The funding requirements under stress include: ̤ cash and collateral outflows, as well as potential capital and funding support required by subsidiaries as a result of loss events; ̤ repayment or loss of all maturing unsecured debt and credit facilities; ̤ additional collateral requirements associated with a potential ratings downgrade; ̤ further contingent funding requirements related to asset downgrades; and
The stress tests also assume that funding from assets is subject to conservative haircuts, that intra-group funding is not available if it is subject to regulatory approval, that no new unsecured funding is available, and that funding from new re/insurance business is reduced.
Composition of spot liquidity in the SRZ liquidity pool as of 31 december 2015 (Total Usd 13.7 billion)
We actively manage liquidity risks to ensure that we can satisfy the financial obligations of the group.
swiss Re’s liquidity stress tests are reviewed regularly and their main assumptions are approved by the group Executive Committee. swiss Re provides FiNmA with a yearly report on its liquidity position, in accordance with FiNmA’s circular 13/5,“liquidity — insurers.”
in 2015, the amount of surplus liquidity improved slightly. The reduction of liquidity due to the payment of the dividend for 2014 to swiss Re ltd and repayments of external debt was more than offset by positive operating cash flows, dividends from subsidiaries as well as a reduction in contingent funding requirements stemming from extreme stress loss events.
̤ Clear accountability: our operations are based on the principle of delegated and clearly defined authority. individuals are accountable for the risks they take on, and their incentives are aligned with swiss Re’s overall business objectives.
Controlled risk-taking The swiss Re group operates within a clearly defined risk policy and risk control framework, which comprises a body of standards that establishes an internal control system for managing risk. it defines key tasks, which represent the five core components of swiss Re’s risk management cycle: ̤ Risk oversight of planning — ensures that the risk implications of plans are understood and determines whether the business and investment plans at group and Business Unit level adhere to swiss Re’s risk tolerance.
Swiss Re’s risk appetite framework Our risk appetite framework establishes the overall approach through which we practice controlled risk-taking throughout the group. The framework is set out in our Group Risk Policy and consists of two inter-linked components: ̤ Risk appetite provides guiding principles on acceptable risks and describes the aggregate level and types of risk that we wish to take or avoid in pursuit of the group’s strategy.
during strategic planning and target-setting, Risk management provides an opinion on the proposed strategy and targets to the group EC and ultimately the group Board of directors. The opinion focuses on the risk impact of the proposed strategy and the risks related to its implementation. The strategic plan, risk appetite and capital allocation ambition are expressed in a target portfolio for the group’s assets and liabilities, which should ultimately deliver the group’s targeted performance.
in the context of the annual planning process, ie during the phase of operational and financial planning, Risk management reviews and challenges plan assumptions and assesses the risks and feasibility related to implementing the proposed plan. it provides transparency on the detailed risk implications of the plan and tests its adherence to risk appetite and risk tolerance.
The group’s risk-taking is steered by our risk appetite and risk tolerance (see swiss Re’s risk appetite framework below).
While the risk appetite guides what types of risk the group aims to write, risk tolerance is an expression of the extent to which the group Board of directors has
O p ti m is e r is k/ re tu rn p o rt fo lio
C o n tr o l r is k ex p o su re s authorised the group Executive Committee (group EC) and Business Unit management teams to assume risk. Risk tolerance criteria are specified for the group and Business Units, as well as for swiss Re’s major legal entities. Furthermore, swiss Re uses a limit framework to limit its risk exposure accumulations at different levels.
Our risk governance is defined in the policies and standards that describe swiss Re’s risk management framework and establish risk management practices throughout the group and its subsidiaries over four hierarchical levels (see below).
The top of swiss Re’s group Risk governance documentation Hierarchy is comprised of risk management related parts of the Corporate Bylaws. The sRl Bylaws establish the ultimate responsibility for risk management activities across the group by assigning responsibilities between the group Board of directors and the group EC.
On level 2 and 3, the group Risk management standards and the group Risk Category standards define the key concepts and tasks that comprise risk governance at the group or the specific risk category. level 4 of the Risk governance documentation Hierarchy is comprised of risk management related method and process documentation.
Level 1 ‒ Risk selection criteria, Risk Appetite Framework, Risk management principles
Board of Directors Responsible for group‘s governance principles and policies, acting through the Finance and Risk Committee, the investment Committee and the Audit Committee
Group Internal Audit performs independent, objective assessments of adequacy and effectiveness of internal control systems
Independent risk controlling swiss Re’s Board of directors is ultimately responsible for the group’s governance principles and policies, including approval of the group’s overall risk tolerance. it mainly performs risk oversight and governance through three committees: ̤ The Finance and Risk Committee defines the group Risk policy and reviews risk capacity limits, monitors adherence to risk tolerance, and reviews top risk issues and exposures.
̤ The investment Committee reviews the financial risk analysis methodology and valuation related to each asset class and ensures that the relevant management processes and controlling mechanisms are in place.
The Business Unit CROs are responsible for risk oversight in their respective Business Unit, as well as for establishing proper risk governance to ensure efficient risk identification, assessment and control. They are supported by functional, regional and legal entity CROs, who are responsible for overseeing risk management issues that arise in their respective areas.
Risk management activities are supported by group internal Audit and Compliance units. group internal Audit performs independent, objective assessments of adequacy and effectiveness of internal control systems. it evaluates the execution of processes including those within Risk management. The Compliance function oversees swiss Re’s compliance with applicable laws, regulations, rules and swiss Re’s Code of Conduct. in addition, it assists the Board of directors, the group EC and management in identifying, mitigating and managing compliance risks. For more information on our audit and compliance functions, see page 101.
swiss Re’s internal risk model (see box on page 70) is used to measure the group’s capital requirements and for defining the risk tolerance, risk limits, and liquidity stress tests. Based on the internal risk model, our overall risk exposure in terms of 99% tail value at risk (tail VaR) increased to Usd 19.6 billion in 2015, up 3% from Usd 19.1 billion in 2014. 99% tail VaR (also known as expected shortfall) represents an estimate of the average annual unexpected loss likely to occur with a frequency of less than once in 100 years.
Alternative risk measures — 99% and 99.5% VaR — showed an increase of our risk by 1% to Usd 14.5 billion and by 2% to Usd 17.4 billion, respectively.
The group capital requirement table on page 65 shows the 99% tail VaR on a standalone basis for each of swiss Re’s core risk categories: ̤ Financial market risk increased by 4%
̤ property and casualty risk increased by 4% to Usd 9.4 billion, net of risk mitigating measures, reflecting growth in natural catastrophe business and continued reductions in our external hedging in the year.
Property and casualty ̤ Costing and reserving ̤ inflation ̤ man-made risks ̤ Natural catastrophes
Usd billions, as of 31 december 2014 2015 Change in % cross reference information property and casualty 9.1 9.4 4 see page 66 life and health 8.0 7.2 −10 see page 67 Financial market 12.2 12.6 4 see page 68 diversification effect –12.9 −13.1 Swiss Re Group 19.1 19.6 3 1 Credit comprises credit default and credit migration risk from both asset management and underwriting. Credit spread risk falls under financial market risk.
Insurance (or underwriting) risk is the risk of incurring a financial loss from coverage provided for both property and casualty and life and health risks. Insurance risk management includes overseeing risk-taking activities, as well as ensuring that an appropriate risk governance framework is defined and applied.
Our Risk management function is embedded in swiss Re’s business processes and follows the business cycle. Before any business is written, Risk management is involved in the group-wide annual business planning; it also reviews underwriting standards, pricing models, and large individual transactions. Risk exposure is monitored against agreed risk limits.
Description property and casualty (p&C) insurance risk arises from the coverage that swiss Re provides for property, liability, motor, and accident risks through its Reinsurance and Corporate solutions Business Units, as well as for specialty risks such as engineering, aviation, and marine. We classify and model our property and casualty risks in three categories at group and Business Unit level: natural catastrophes (eg, earthquakes and windstorms), man-made risks (eg, liability and fire), and geopolitical risks (eg, terrorism). We also monitor and manage underlying risks inherent in the business we underwrite, such as inflation or uncertainty in pricing and reserving.
The higher natural catastrophe risk can also be seen in the stress results on page 67. The table shows swiss Re’s exposure to a set of major natural catastrophe scenarios, net of retrocession and securitisation. These risk exposures take into account the fact that such a scenario will trigger claims in other lines of business in addition to the most affected property line.
While our exposure to Californian and Japanese earthquake remained broadly stable (−4% and +2%, respectively), our Atlantic hurricane exposure showed a significant increase (+31%). This is driven by business growth and a reduction in external hedges as mentioned above. Our exposure to European windstorm risk decreased (−17%) in 2015, mainly due to model enhancement and the Us dollar appreciation against the euro, partly offset by growth in risk due to expiry of several external hedges.
Management swiss Re writes property and casualty business using the four-eye principle: every transaction must be reviewed by at least two authorised individuals. An exception to this procedure are single risk acceptances, which can be authorised by one underwriter whereby the four-eye principle is applied by spot checks after acceptance. Each underwriter is assigned an individual underwriting authority based on technical skills and experience; any business exceeding this authority triggers a defined escalation process.
Description swiss Re’s life and health (l&H) insurance risk arises from the business we take on when providing mortality (death), longevity (annuity), and morbidity (illness and disability) coverage through both the Reinsurance Business Unit, and when acquiring run-off business through the Admin Re® (life Capital since 1 January 2016) Business Unit. in addition to potential shock events, such as a severe pandemic, we monitor and manage underlying risks inherent in life and health contracts (eg, pricing and reserving risks) that arise when mortality, morbidity, or lapse experience deviates from expectations. The investment risk that is part of some life and health business is monitored and managed as financial market risk.
Developments in 2015 swiss Re’s overall life and health risk decreased by 10% to Usd 7.2 billion. The decrease was to a large extent driven by foreign exchange movements, as the depreciation of several currencies (in particular the Canadian dollar and Australian dollar) against the Us dollar had a significant impact on the present value of our liabilities.
The decline in the overall l&H shortfall was further amplified by a large exposure decrease in mortality trend risk (death) mainly due to lower mortality assumptions and model improvements for several markets. This was partly offset by higher morbidity (illness and disability) and lethal pandemic risk, where we experienced more business. The inclusion of the guardian Financial services portfolio (see page 51) substantially increased our longevity exposure thus leading to a further decline in overall l&H shortfall, as longevity risk provides a natural hedge to some of the mortality trend risk (due to diversification).
To control risk exposure, we have an aggregate group limit governing the acceptance of all life and health risks, with separate individual limits for mortality, longevity and lethal pandemic risk.
market exposure limits, which are regularly monitored, are in place for catastrophe and stop-loss business. We pay particular attention to accumulation risk in densely populated areas and apply limits for individual buildings.
As in property and casualty, all large, complex or unusual transactions are reviewed and require individual approval from swiss Re’s underwriting, client management and risk management functions.
We further manage the risk exposure of swiss Re’s life and health book by external retrocession and also issue insurance-linked securities to reduce peak exposures (eg, vita bond programme).
Insurance risk stress tests: Single event losses with a 200-year return period1 pre-tax impact on economic capital in Usd billions, as of 31 december 2014 2015 Change in %
Financial market and credit risk management involves identifying, assessing and controlling risks inherent in the financial markets as well as counterparty risks, while monitoring compliance with our risk management standards. Both risk categories are managed centrally by our Financial Risk Management team.
Financial market risk is the risk that assets or liabilities may be impacted by movements in financial market prices or rates − such as equity prices, interest rates, credit spreads, foreign exchange rates or real estate prices. Financial market risk originates from two main sources: our own investment activities and the sensitivity of the economic value of liabilities to financial market fluctuations. swiss Re actively manages the potential mismatch in financial market risk between its liabilities and the assets that it holds.
This process is complemented by regular risk discussions between Financial Risk management, Asset management, Business Units and the group’s external investment managers.
Developments in 2015 in 2015, swiss Re’s credit risk — which includes default and migration (deterioration in credit rating) risk — increased by 29% to Usd 3.4 billion (see table on page 65) and the credit default stress test increased by 22% (see table above).
The changes reflect the inclusion of the guardian Financial services portfolio (see page 51) and growth in the underwriting portfolio.
Financial Risk management monitors and reports credit exposure and limits for the group and its Business Units on a weekly basis. The reporting process is supported by a group-wide credit exposure information system that contains all relevant data, including corporate counterparty details, ratings, credit risk exposures, credit limits, and watch lists. All credit practitioners in the group and Business Units have access to this system, thus providing the necessary transparency to implement exposure management strategies for individual counterparties, industry sectors, and geographic regions.
Financial market and credit risk stress tests pre-tax impact on economic capital in Usd billions, as of 31 december 2014 2015 Change in %
Market scenarios 100bp increase in credit spreads –3.8 –4.4 18 30% fall in equity markets (incl. hedge funds) –3.2 –2.9 –10 15% fall in real estate markets –0.6 –0.6 9 100bp parallel increase in global yield curves 0.4 0.1 –70
swiss Re uses a proprietary integrated risk model to determine the economic capital required to support the risks on the company’s books, as well as to allocate risk-taking capacity to the different lines of business. The group’s internal risk model provides a meaningful assessment of the risks to which the company is exposed and is an important tool for managing the business. it is used for determining capital requirements for internal purposes as well as for regulatory reporting under the swiss solvency Test (ssT) and solvency ii for our legal entities in continental Europe. The model provides the basis for capital cost allocation in swiss Re’s Economic Value management (EVm) framework, which is used for pricing, profitability evaluation and compensation decisions (see pages 55–56 for further information on EVm).
in addition, the model is used to calculate value at risk (VaR) measures including 99.5% VaR, which is used in other regulatory regimes such as solvency ii. 99.5% VaR represents the loss likely to be exceeded in only one year out of two hundred and is thus more severe than the 99% VaR measure, which estimates the loss likely to be exceeded in one year out of one hundred.
in y ea r lo ss in y ea r lo ss loss profit
The group’s framework for mitigating operational risk is based on its three lines of defence, assigning primary responsibility for identifying and managing risks to individual risk takers (first line of defence), with independent oversight and control by the second (Risk management and Compliance) and third line of defence (group internal Audit). This approach is designed to achieve a strong, coherent and groupwide operational risk culture built on the overriding principles of ownership and accountability.
management is responsible for assessing operational risks based on a centrally coordinated methodology. members of swiss Re’s group Executive Committee are required to assess and certify the effectiveness of the internal control system for their respective function or unit on a quarterly basis. All operational losses and incidents are reported and tracked in a central system to ensure that they are resolved as well as to avoid the recurrence of the same or similar events.
After more than ten years of development, solvency ii became effective across the European Economic Area on 1 January 2016. swiss Re has been actively engaged in the implementation process, particularly in supporting the equivalence for the swiss insurance supervisory system. The European Commission has recognised the swiss system, including the ssT, as fully equivalent. switzerland and Bermuda are currently the only jurisdictions worldwide that have obtained this status. As a next step, industry-wide public disclosure of companies’ solvency and financial condition will become mandatory in 2017 for both solvency ii and the ssT. Furthermore, in China the main rules of the new China Risk Oriented solvency system (C-ROss) were published in February 2015. With this, China undertakes an important step towards an economic, risk-based system, similar to ssT and solvency ii.
The iAis decided to adjust its delivery process for ComFrame, the common framework for the supervision of iAigs. ComFrame includes a global insurance capital standard (iCs), which will be adopted in 2019 — one year later than originally planned — leading to its implementation in 2020. Until the adoption, the iAis might substantially revise the iCs.
many countries impose restrictions on the transaction of reinsurance business. The global Reinsurance Forum, which swiss Re is currently chairing, actively promotes the advantages of open and competitive markets, in particular the greater choice of reinsurers, products and prices, as well as benefits from diversification through the spreading of risk and increased financial stability.
political developments can threaten swiss Re’s operating model but also open up opportunities for developing the business. The group adopts a holistic view of political risk and analyses developments in individual markets and jurisdictions, as well as cross-border issues such as war, terrorism, energyrelated issues and international trade controls.
swiss Re is a founding signatory to the UN principles for sustainable insurance (UN psi) and is currently a board member of this initiative. The UN psi provide a global framework for managing environmental, social and governance challenges. swiss Re has been actively contributing to the initiative for several years, co-chaired it from 2013 to 2015 and publicly reports progress against the principles in its annual Corporate Responsibility Report; the 2015 report is expected to be published in may 2016.
in 2015, swiss Re was again recognised as “insurance industry sector leader” in the dow Jones sustainability indices. This is the ninth time since 2004 that swiss Re has led the insurance sector in these rankings. The award highlights swiss Re’s long-term commitment to sustainable business and our efforts to further embed sustainability into key business processes and operations.
For more information on our sustainability practices, see also the Corporate Responsibility section on page 116.
The group’s risk identification processes are supported by a systematic framework that identifies and assesses emerging risks and opportunities across all risk categories, including potential surprise factors that could affect known loss potentials. This internal sONAR system gives swiss Re employees a forum to raise ideas on emerging risks and report early signals using an interactive platform. This information is complemented with insights from collaboration with think tanks, academic networks and international organisations and institutions. Findings are shared with senior management and other internal stakeholders, providing them with a prioritised overview of newly identified emerging risks and an estimate of their potential impact on swiss Re’s business.
To further advance risk awareness across the industry and beyond, swiss Re continues to participate actively in strategic risk initiatives such as the international Risk governance Council, and the CRO Forum’s Emerging Risk initiative. Over the past year, we contributed to several publications on emerging risk topics, including the international Risk governance Council guidelines for emerging risk governance and a CRO Forum position paper “The smart Factory — Risk management perspectives”.
Corporate GovernanCe the Board of Directors assesses the Group’s corporate governance on an annual basis against relevant best practice standards. It monitors corporate governance developments globally. It receives updates on developments affecting corporate governance and considers the relevant studies and surveys on corporate governance. Information on compensation of and loans to members of the Board of Directors and the Group executive Committee (Group eC) is included in the Compensation report beginning on page 130 and their shareholdings in Swiss re are listed in the notes to the Swiss re Ltd financial statements.
Swiss Re’s corporate governance framework Swiss re’s Board of Directors is responsible for oversight, while the Group eC is responsible for managing operations. this structure maintains effective mutual checks and balances between the top corporate bodies. our corporate governance principles and procedures are defined in a series of documents governing the organisation and management of the company. these include at the Group level: ̤ the Group Code of Conduct, outlining our compliance framework and setting out the basic legal and ethical principles and policies we apply globally; ̤ the Corporate Governance Guidelines (Guidelines), setting forth the Group’s governance framework, principles and processes, ensuring efficient and consistent corporate governance across the Group; ̤ the articles of association, defining the legal and organisational framework of the Group’s holding company (available at corporate_governance/ corporate_regulations.html); ̤ the Group Bylaws, defining the governance structure within the Group as well as the responsibilities of the Board of Directors, Chairman, vice Chairman, Lead Independent Director, Board committees, Group eC, Group Ceo and of the further individual Group eC members including the regional presidents; furthermore they describe the relevant reporting procedures; ̤ the Board Committee Charters, outlining the duties and responsibilities of the Board committees; and
Group and Business Unit Bylaws: comprehensive revision the Board of Directors decided to review the Group and the BU Bylaws comprehensively in 2015 with the following aims: 1. the implementation of corporate governance changes which occurred based on the new Group target operating Model and 2. the alignment with the latest best practice corporate governance standards and with new stakeholders’ demands.
Board of Directors and Group EC Binding votes on Board of Directors and Group EC compensation
̤ renato Fassbind, C. robert Henrikson, Hans Ulrich Maerki and Carlos e. represas were elected by the annual General Meeting 2015 for a further one-year term of office as members of the Compensation Committee.
̤ the Board of Directors nominated Sir paul tucker to be proposed to the annual General Meeting 2016 for election as a new member to the Board of Directors, whereas Mathis Cabiallavetta, Hans Ulrich Maerki and Jean-pierre roth will not stand for re-election.
̤ no changes occurred in 2015 in the composition of the Group eC and the roles of the Group eC members.
̤ “the ordinance against excessive Compensation at public Corporations” (ordinance) became effective on 1 January 2014.
̤ proposals with respect to the following three motions were submitted to the annual General Meeting 2015 for binding votes: 1. the maximum aggregate amount of the compensation of the Board of Directors for the next term of office; 2. the maximum aggregate amount for the fixed and variable long-term compensation of the Group eC for the financial year 2016; and 3. the aggregate amount of variable short-term compensation of the Group eC for the financial year 2014.
Swiss re Ltd has a level I american Depositary receipts (aDrs) programme in the US. the aDrs are traded over the counter (ISIn US8708861088, otC symbol SSreY). Following a split in 2015, one Swiss re Ltd share equals four aDrs. neither the aDrs, nor the underlying Swiss re shares, are listed on a securities exchange in the US.
Significant shareholders and shareholder structure Under the Swiss Federal act on Stock exchanges and Securities trading (SeSta), anyone holding shares in a company listed on the SIX Swiss exchange is required to notify the company and the SIX Swiss exchange if its direct or indirect holding reaches, falls below or exceeds the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 33⅓%, 50% or 66⅔% of the voting rights pursuant to the entry into the commercial register, whether * Since 1 January 2016 admin re is part of the Business Unit Life Capital.
Shareholder1 number of shares % of voting rights and share capital Creation of the obligation to notify 1 In the context of Swiss reinsurance Company Ltd’s issuance of perpetual Subordinated Capital Instruments in 2012 with a face value of USD 750 million with a stock settlement in registered shares of Swiss re Ltd, aquarius + Investments plc (“aquarius”) reported in compliance with SeSta and the ordinance of the Swiss Financial Market Supervisory authority on Stock exchanges and Securities trading (Stock exchange ordinance – FInMa, SeSto-FInMa) a disclosable purchase and a sales position, each corresponding to 6.32% of the voting rights. aquarius does not hold any registered shares of Swiss re Ltd.
2 Blackrock, Inc. reported on 6 May 2015 that it holds directly and indirectly through a number of its Group companies, in the capacity of investment manager for funds and clients 18 300 365 registered shares of Swiss re Ltd, and contracts for difference conferring a total of 78 229 voting rights in Swiss re. Blackrock, Inc.’s reported holding as of 30 april 2015 was 18 378 594 voting rights, corresponding to 4.96% of the voting rights which can be exercised autonomously of the beneficial owners.
* according to article 120 (1) FMIa anyone who directly or indirectly or acting in concert with third parties acquires or disposes shares or acquisition or sale rights relating to shares of a company with its registered office in Switzerland whose equity securities are listed in whole or in part in Switzerland, or of a company with its registered office abroad whose equity securities are mainly listed in whole or in part in Switzerland, and thereby reaches, falls below or exceeds the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 33⅓%, 50% or 66⅔% of the voting rights, whether exercisable or not, must notify this to the company and to the stock exchanges on which the equity securities are listed. according to article 120 (3) FMIa, anyone who has the discretionary power to exercise the voting rights associated with equity securities in accordance with article 120 (1) FMIa is also subject to the notification. the person or group is obliged to make a notification in writing to the company (issuer) and the stock exchange no later than four trading days after the creation of the obligation to notify (conclusion of a contract).
neither Swiss re Ltd nor the Group companies can exercise the voting rights of these shares.
registered shares with voting rights by shareholder type registered shares with voting rights by country registered shares with voting rights by size of holding
Cross-shareholdings Swiss re has no cross-shareholdings in excess of 5% of capital or voting rights with any other company.
Shares held by Swiss re 28 547 226 7.7 Share Buy-back programme 4 420 000 1.2 1 Without Swiss re’s holdings.
as of 31 December 2015 Shareholders in % Shares in %
Capital as of 31 December 2015, the fully paid-in share capital of Swiss re Ltd amounted to CHF 37 070 693.10. It is divided into 370 706 931 registered shares, each with a par value of CHF 0.10.
Conditional and authorised capital in particular Conditional capital as of 31 December 2015, the conditional capital of Swiss re Ltd consisted of the following categories: Conditional capital for Equity-Linked Financing Instruments the share capital of the company may be increased up to CHF 5 000 000 by issuing a maximum of 50 000 000 registered shares, payable in full, each with a nominal value of CHF 0.10. Such shares are issued through the voluntary or mandatory exercise of conversion and/or option rights granted by the company or Group companies in connection with bonds or similar instruments, including loans or other financial instruments (equity-Linked Financing Instruments).
the acquisition of registered shares through the exercise of conversion or option rights and any further transfers of registered shares shall be subject to the restrictions specified in the articles of association.
Authorised capital as of 31 December 2015, the authorised capital of Swiss re Ltd was as presented in the table below.
according to the articles of association, the Board of Directors is authorised to increase the share capital of the company at any time up to 21 april 2017 by an amount not exceeding CHF 8 500 000 through the issue of up to 85 000 000 registered shares, payable in full, each with a nominal value of CHF 0.10. Increases by underwriting as well as partial increases are permitted. the Board of Directors determines the date of issue, the issue price, the type of contribution and any possible acquisition of assets, the date of dividend entitlement as well as the expiry or allocation of non-exercised subscription rights.
the subscription rights of existing shareholders may not be excluded with respect to a maximum of CHF 5 000 000 through the issue of up to 50 000 000 registered shares, payable in full, each with a nominal value of CHF 0.10, out of the total amount of authorised capital.
the Board of Directors may exclude or restrict the subscription rights of existing shareholders with respect to a maximum of CHF 3 500 000 through the issue of up to 35 000 000 registered shares, payable in full, each with a nominal value of CHF 0.10, out of the total amount of authorised capital. Such exclusion or restriction relates to the use of shares in connection with mergers, acquisitions (including take-over) of companies, parts of companies or holdings, participations or new investments planned by the company and/or Group companies, financing or re-financing of such mergers, acquisitions or new investments, the conversion of loans, securities or equity securities. exclusion and restriction may also relate to improving the regulatory capital position of the company or Group companies, including private placements, in a fast and expeditious manner if the Board of Directors deems it appropriate or prudent to do so.
the subscription and acquisition of the new registered shares, as well as each subsequent transfer of registered shares, shall be subject to the restrictions specified in the articles of association.
the annual General Meeting 2013 further approved the cancellation of the authorised capital created for the use as consideration for any remaining minority shareholders of Swiss reinsurance Company Ltd for any voluntary or mandatory surrendering of their shares in Swiss reinsurance Company Ltd after the execution of the public exchange offer at any time up to
no changes in the share capital of Swiss re Ltd occurred during 2012.
Shares all shares issued by Swiss re Ltd are fully paid-in registered shares, each with a par value of CHF 0.10. each share carries one vote. there are no categories of shares with a higher or limited voting power, privileged dividend entitlement or any other preferential rights, nor are there any other securities representing a part of the company’s share capital.
the company cannot exercise the voting rights of treasury shares. as of 31 December 2015, shareholders had registered 203 670 968 shares for the purpose of exercising their voting rights, out of a total of 370 706 931 shares issued. as of 31 December 2015, 337 739 705 shares were entitled to dividend payment.
persons acquiring registered shares will, upon application, be entered in the share register without limitation as shareholders with voting power if evidence of the acquisition of the shares is provided and if they expressly declare that they have acquired the shares in their own name and for their own account and, where applicable, that they are compliant with the disclosure requirement stipulated by the Federal act on Stock exchanges and Securities trading (SeSta). the Board of Directors is allowed to remove the entry of a shareholder with voting rights from the share register retroactively from the date of entry if the entry was obtained under false pretences or if the owner, whether acting alone or as part of a group, has breached notification rules.
Admissibility of nominee registrations persons not expressly declaring in their application for entry in the share register that they are holding shares for their own account (nominees) are entered without further inquiry in the share register of Swiss re Ltd as shareholders with voting rights of up to a maximum of 2% of the outstanding share capital available at the time. additional shares held by such nominees that exceed the limit of 2% of the outstanding share capital are entered in the share register with voting rights only if such nominees disclose the names, addresses and shareholdings of any persons for whose account the nominee is holding 0.5% or more of the outstanding share capital. In addition, such nominees must comply with the disclosure requirements of the SeSta.
Convertible bonds and options Convertible bonds as of 31 December 2015, neither Swiss re Ltd nor any of its subsidiaries has any bonds outstanding that are convertible into equity securities of Swiss re Ltd solely at the option of bondholders. the same applied as of 31 December 2014 and 31 December 2013.
In 2012, Swiss reinsurance Company Ltd issued CHF 320 000 000 of 7.25% perpetual subordinated notes and USD 750 000 000 of 8.25% perpetual subordinated capital instruments both with stock settlement (collectively the “subordinated securities”), which provide Swiss reinsurance Company Ltd with options to initiate settlement of the subordinated securities by delivery of shares of Swiss re Ltd.
For details on stock options granted to Swiss re employees, see note 15 to the Group financial statements on pages 231–233.
Conflicts of interest the members of the Board of Directors are also subject to procedures to avoid any action, position or interest that conflicts with an interest of Swiss re Ltd or the Swiss re Group or gives the appearance of a conflict.
Mathis Cabiallavetta Swiss 70 2008 raymond K.F. Ch’ien Chinese 63 2008 Mary Francis British 67 2013 rajna Gibson Brandon Swiss 53 2000 C. robert Henrikson american 68 2012 Hans Ulrich Maerki Swiss 69 2007 trevor Manuel South african 59 2015 Carlos e. represas Mexican 70 2010 Jean-pierre roth Swiss 69 2010 philip K. ryan american 59 2015 Susan L. Wagner american 54 2014 1 the members were initially elected to the Board of Directors of Swiss reinsurance Company Ltd, the Group’s former parent company. all members were subsequently elected to the Board of Directors of the Group’s new holding company, Swiss re Ltd, on 17 February 2011 with the exception of the following members who were elected to the Board of Directors of Swiss re Ltd as follows: renato Fassbind was elected on 15 april 2011, C. robert Henrikson was elected on 13 april 2012, Mary Francis was elected on 10 april 2013, Susan L. Wagner was elected on 11 april 2014, and trevor Manuel and philip K. ryan were elected on 21 april 2015.
External appointments ̤ vice Chairman of the Institute of International Finance ̤ Member of the european Financial
Services round table ̤ Member of the Board of trustees of avenir Suisse ̤ Chairman of the Zurich art Society
Career after two years with Kunz Consulting aG, renato Fassbind joined F. Hoffmann- La roche aG in 1984, becoming Head of Internal audit in 1988. From 1986 to 1987, he worked as a public accountant with peat Marwick in new Jersey, USa. In 1990, he joined aBB Ltd as Head of Corporate Staff audit and, from 1997 to 2002, was Chief Financial officer and member of the Group executive Committee. In 2002, he joined Diethelm Keller Holding Ltd as Group Chief executive officer. From 2004 to 2010, he was Chief Financial officer and member of the executive Board of Credit Suisse Group aG. renato Fassbind was elected to Swiss re’s Board of Directors in 2011. He became vice Chairman in april 2012 and Lead Independent Director in april 2014. He chairs the audit Committee and is a member of the Chairman’s and Governance Committee and the Compensation Committee.
Career Mathis Cabiallavetta held several positions at UBS aG from 1971, including president of the Group executive Board in 1996 and Chairman in 1998. He joined Marsh & McLennan Companies in 1999 and was vice Chairman of the company from 2001 to 2004. He is a former member of the Bank Council of the Swiss national Bank and a past vice Chairman of the Board of Directors of the Swiss Bankers association. He was also a member of the Committee of the Board of Directors of the Swiss Stock exchange and the International Capital Markets advisory Committee of the Federal reserve Bank of new York. Mathis Cabiallavetta was elected to Swiss re’s Board of Directors in 2008 and was its vice Chairman from March 2009 to april 2015. He is a member of the Finance and risk Committee and the Investment Committee.
External appointments ̤ Board member of ensco plc ̤ Senior advisor to Chatham House
Career rajna Gibson Brandon is a professor of Finance at the University of Geneva and Director of the Geneva Finance research Institute. She held professorships at the University of Lausanne from 1991 to 2000 and the University of Zurich from 2000 to 2008. She was a member of the Swiss Federal Banking Commission from 1997 to 2004. She was elected to Swiss re’s Board of Directors in 2000 and is a member of the Finance and risk Committee and the Investment Committee.
External appointments ̤ president of the Scientific Council of the Swiss training Centre for Investment professionals/aZeK
Career raymond K.F. Ch’ien was Group Managing Director of Lam Soon Hong Kong Group from 1984 to 1997 and Chairman of CDC Corporation from 1999 to 2011. He was elected to Swiss re’s Board of Directors in 2008 and is a member of the audit Committee and the Investment Committee.
̤ Member of the economic Development Commission of the Government of the Hong Kong Sar
Career C. robert Henrikson was Chairman and Chief executive officer of MetLife, Inc. from 2006 to 2011. Before, he held senior positions in MetLife’s individual, group and pension businesses and became Chief operating officer of the company in 2004. He is a former Chairman of the american Council of Life Insurers, a former Chairman of the Financial Services Forum, Director emeritus of the american Benefits Council and a former member of the U.S. president’s export Council. He was elected to Swiss re’s Board of Directors in 2012 and chairs the Compensation Committee. In addition, he is a member of the Chairman’s and Governance Committee and the Finance and risk Committee.
External appointments ̤ Board member of Invesco Ltd ̤ Board member of ameriCares ̤ Member of the Boards of trustees of emory University, S.S. Huebner Foundation for Insurance education and Indian Springs School
Educational background ̤ Master of Science in Business administration, University of Basel, Switzerland
Career trevor Manuel was a Minister in the South african government for more than 20 years, serving under the presidents Mandela, Mbeki, Motlanthe and Zuma. He served as Finance Minister from 1996 to 2009. Before his retirement from public office in 2014, he was Minister in the presidency responsible for South africa’s national planning Commission. He also assumed a number of ex officio positions on international bodies, including the United nations Commission for trade and Development, the World Bank, the International Monetary Fund, the G20, the african Development Bank and the Southern african Development Community. trevor Manuel was elected to Swiss re’s Board of Directors in april 2015. He is a member of the Investment Committee.
External appointments ̤ Board member of SaBMiller plc ̤ Member of the International advisory
University of Johannesburg ̤ Honorary professor at the University of Cape town ̤ trustee of the allan Gray orbis
Educational background ̤ economics degree, University of Geneva, Switzerland ̤ phD in political Science, Graduate
Career philip K. ryan held various positions with Credit Suisse from 1985 until 2008, including Chairman of the Financial Institutions Group (UK), Chief Financial officer of Credit Suisse Group (Switzerland), Chief Financial officer of Credit Suisse asset Management (UK) and Managing Director of CSFB Financial Institutions Group (USa/UK). He was Chief Financial officer of the power Corporation of Canada from January 2008 until May 2012. In that capacity, he was a director of IGM Financial Inc., Great-West Lifeco Inc., and several of their subsidiaries, including putnam Investments. philip K. ryan was elected to Swiss re’s Board of Directors in april 2015. He chairs the Finance and risk Committee and is a member of the Chairman’s and Governance Committee and the audit Committee.
Career Between 1968 and 2004, Carlos e. represas held various senior positions at nestlé in the US, Latin america and europe, including executive vice president and Head of the americas of nestlé S.a. in Switzerland from 1994 to 2004. He was Chairman of the Board of nestlé Group Mexico from 1983 to 2010. Carlos e. represas was elected to Swiss re’s Board of Directors in 2010 and is a member of the Compensation Committee.
and Merck & Co. Inc. ̤ non-executive Chairman Latin america, Bombardier Inc. ̤ president of the Mexico Chapter of the
Educational background ̤ economics degree, national University of Mexico, Mexico ̤ Industrial economics degree, national polytechnic Institute, Mexico
all Board members comply with the requirements on external mandates set out in the articles of association.
Qualifications the Board of Directors must assemble among its members the balance of managerial expertise and knowledge from different fields required for the fulfilment of the oversight responsibility as well as for sound independent decision-making in line with the needs of the business. Membership on the Board of Directors requires a special skill set including international, national, industry or sector specific experience. the prevalence of these skills ensures that Swiss re Ltd has the relevant expertise required for active involvement and supervision of an international listed company. the Board of Directors needs to assemble the necessary qualifications, skills and diversity to perform all required responsibilities.
Board members’ training the company aims to constantly develop further the abilities of its Board members. newly elected Board members receive a comprehensive introduction in order to gain a sound understanding of the Group’s organisation and business, allowing them to perform their duties effectively. all Board members update and enhance their knowledge of emerging business trends and risks through regular meetings with internal and external experts throughout the year.
the Board of Directors proposes that the following Board members be re-elected for a one-year term: ̤ Walter B. Kielholz ̤ renato Fassbind ̤ raymond K.F. Ch’ien ̤ Mary Francis ̤ rajna Gibson Brandon ̤ C. robert Henrikson ̤ trevor Manuel ̤ Carlos e. represas ̤ philip K. ryan ̤ Susan L. Wagner
Furthermore, the Board of Directors proposes: ̤ Sir paul tucker to the annual General Meeting 2016 for first-time election as a member of the Board of Directors for a one-year term as part of the continued aim to further diversify and renew its composition.
the Board of Directors proposes that the following Board member be re-elected as Chairman of the Board of Directors, for a one-year term: ̤ Walter B. Kielholz the Board of Directors also proposes that the following Board members be re-elected as members/be elected as new member of the Compensation Committee, for a one-year term: ̤ renato Fassbind ̤ C. robert Henrikson ̤ Carlos e. represas ̤ raymond K.F. Ch’ien (new member)
the Chairman chairs the Chairman’s and Governance Committee and develops and continually adapts Swiss re’s governance to regulatory and corporate requirements. He keeps himself informed about the activities within the Group and may sit on Group and Business Unit executive Committee meetings as he deems necessary. He also has access to all corresponding documentation and minutes. He ensures adequate reporting by the Group eC and the Group Ceo to the Board of Directors and facilitates their communication with the Board. He annually assesses the Group Ceo’s performance and discusses with the Group Ceo the annual performance assessment of the Group eC members.
the Chairman arranges introduction for new Board members and appropriate training for all Board members.
each committee consists of a chairperson and at least three other members elected from among the Board of Directors. the members of the Compensation Committee are elected by the annual General Meeting of shareholders.
Audit Committee Responsibilities the central task of the audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities as they relate to the integrity of Swiss re’s and the Group’s financial statements, the Swiss re Group’s compliance with legal and regulatory requirements, the external auditor’s qualifications and independence, and the performance of GIa and the Group’s external auditor. the audit Committee serves as an independent and objective monitor of Swiss re’s and the Group’s financial reporting process and system of internal control, and facilitates ongoing communication between the external auditor, Group eC, Business Units, GIa, and the Board with regard to the Swiss re Group’s financial situation.
Members ̤ renato Fassbind, Chair ̤ raymond K.F. Ch’ien ̤ Mary Francis ̤ Hans Ulrich Maerki ̤ philip K. ryan (since 21 april 2015)
Members ̤ C. robert Henrikson, Chair ̤ renato Fassbind ̤ Hans Ulrich Maerki ̤ Carlos e. represas
Finance and Risk Committee Responsibilities the Finance and risk Committee annually reviews the Group risk policy and proposes it for approval to the Board of Directors, reviews risk and capacity limits and the risk Control Framework and important risk exposures, including new products, strategic expansions, and compensation related risks. It reviews critical underwriting standards as well as principles used in internal risk measurement, asset and liability valuation, capital and liquidity adequacy assessment, and economic performance management. In addition, it reviews the Group’s funding structure, as well as capital and liquidity management activities.
(Chair until 21 april 2015) ̤ Mary Francis ̤ rajna Gibson Brandon ̤ C. robert Henrikson ̤ Susan L. Wagner ̤ raymund Breu (until 21 april 2015)
Investment Committee Responsibilities the Investment Committee approves the strategic asset allocation and reviews tactical asset allocation decisions. It reviews the monthly performance of all financial assets of the Swiss re Group and endorses or is being informed on participations and principal Investments. It reviews the risk analysis methodology as well as the valuation methodology related to each asset class and ensures that the relevant management processes and controlling mechanisms in asset Management are in place.
̤ raymond K.F. Ch’ien ̤ rajna Gibson Brandon ̤ trevor Manuel (since 21 april 2015) ̤ Jean-pierre roth ̤ raymund Breu (until 21 april 2015)
Work methods of the Board of Directors and its committees Convening meetings and invitation Swiss re’s Board of Directors oversees governance, audit, compensation, finance and risk, and investment and is supported in this responsibility by its committees. the full Board and its committees meet at the invitation of the Chairman of the Board of Directors as often as business requires or at least quarterly. any member of the Board of Directors or the Group eC may, for a specific reason, require the Chairman to call an extraordinary Board of Directors or committee meeting. the members of the Board of Directors ensure that they are able to fulfil the responsibilities of their position even in periods when there are increased demands on their time. the Chairman defines the agenda for each meeting and therefore works closely with the chairpersons
the Board of Directors and its committees can also adopt resolutions by written agreement if no member of the Board of Directors requests a discussion of the topic. a circular resolution may be adopted only, if all the members sign the circular resolution or answer the e-mail respectively. a circular resolution shall be passed if the majority of the total number of Board members (or Board committee members) express their agreement or disagreement with the resolution.
the table below provides an overview of the meetings of the Board of Directors and its committees held in 2015.
Board of Directors 13 meetings Group eC members, Group Chief Legal officer, Company Secretary 4 hours
Chairman’s and Governance Committee 7 meetings Group Ceo, Company Secretary 2 hours audit Committee 8 meetings Group Ceo, Group CFo, Group Cro, Group Coo, Group Chief Legal officer, Chief Compliance officer, Head Group Internal audit, Chief accounting officer, Lead auditors of external auditor, Company Secretary 3 hours
Compensation Committee 6 meetings Group Ceo, Group Coo, Chief Human resource officer, Head reward, advisers1 3 hours
Finance and risk Committee 6 meetings Group Ceo, Group CFo, Group Cro, Group Chief Strategy officer,
Group Chief Underwriting officer, Group Chief Investment officer, Group Coo, Group treasurer, Ceo reinsurance, Ceo Corporate Solutions, Company Secretary
Group based on proposals by the Group eC; ̤ approves the capital allocation plan for both Underwriting and asset Management; ̤ approves the Swiss re Group risk Strategy, risk Limits and risk Management Framework; ̤ approves the entry into new business activities and the exit of existing activities, provided they are of strategic relevance; ̤ approves significant Corporate transactions, participations and principal Investments and approves an annual capital expenditure plan; ̤ approves the financial objectives and the means necessary to achieve them; and
̤ approves all matters where such decisions exceed the authorities delegated to the Board committees, the Group Ceo and the Group eC and overrules decisions if necessary.
Governance and organisation ̤ determines the operating model of the Swiss re Group and the organisational structure commensurate with this model and the strategy; ̤ issues and regularly reviews the Group Bylaws, necessary policies and directives, including governance standards and the Group Code of Conduct; ̤ regulates and supervises internal control; and
̤ regulates the compensation framework of the Swiss re Group as well as the Board of Directors and Group eC compensation for ultimate approval by the General Meeting of shareholders.
̤ approves the annual report of Swiss re Ltd and the Swiss re Group.
̤ annually reviews with the Group eC the Swiss re Group’s overall Human Capital situation, strength of management and issues like diversity and inclusion, performance process and quality of succession planning.
̤ issues guidelines relating to the delegation of decision-making authority within the Group
Planning ̤ prepares and proposes the Group business plan to the Board of Directors for approval and reviews the Business Units’ business plans
Financial Reporting ̤ prepares and presents to the Board of Directors the annual and interim financial statements of the Group together with segment reporting on the Business Units
Risk Management ̤ establishes the principles for external retrocession and the balancing of Group-wide catastrophe and accumulated risk
Business transactions ̤ decides on certain strategic transactions and proposes important strategic transactions to the Board of Directors for discussion and decision
Compensation ̤ makes proposals for the individual compensation of selected members of senior management
̤ proposes benefit plans to the Compensation Committee for decision the Group eC discharges its responsibilities as a joint body, except for responsibilities delegated to the Group Ceo and further individual Group eC members as outlined in the Group Bylaws.
Group Chief Executive Officer the Group Ceo is responsible for overseeing the operational management of the Group. this responsibility covers the Group Functions and the three Business Units reinsurance, Corporate Solutions and Life Capital. He leads and manages the Group eC, its processes, including succession planning, cost and is responsible for its performance. He oversees the work of the Business Unit Ceos and the Group Function heads and gives them guidance on the execution of their tasks. He develops the Group Strategy together with the Group eC and submits it to the Board of Directors for approval. once approved he focuses on its implementation and further development.
Group Chief Financial Officer the Group CFo is responsible for the Group-wide Finance function with a focus on steering and achieving the company’s financial targets. He provides guidance to the Business Unit CFos, and gives input on the financial aspects of strategic projects and transactions. the Group CFo provides the audit Committee and Finance and risk Committee with regular and ad hoc financial reporting that allow the committees to fulfil their respective authorities as per the Group Board Committee Charter.
Group Chief Investment Officer the Group CIo is responsible for the Group-wide asset Management function and its investment results. He manages the investment portfolio, advises the Business Units on defining their strategic asset allocation (Saa), and implements the Group and Business Units Saas within the risk limits set by the Group eC. the Group CIo retains responsibility for decisions on investment tactics and also provides financial market advice on strategic projects and transactions. In addition, the Group CIo is responsible for the asset Management organisation, operational and compliance risks pertinent to his responsibilities.
Group Chief Operating Officer the Group Coo is responsible for exercising governance and oversight of all operations functions. this responsibility includes exercising governance on behalf of the Group in the functions under his responsibility, being a strategic partner to the Group and the Business Units in all operational matters, and providing a high quality, cost effective and differentiating operating platform for the whole Group.
He augments the Business Unit’s activities with targeted initiatives including direct investments. He also systematically monitors and steers Group Strategy implementation.
Group Chief Underwriting Officer the Group CUo is responsible for steering capital to the most attractive areas in underwriting leading themes that are of strategic importance for Swiss re Group’s underwriting, and providing research & Development that improves both capital allocation and risk selection.
Regional Presidents the regional presidents for the areas americas, asia and eMea are responsible for representing the Swiss re Group externally and internally, as well as enhancing the Swiss re brand and safeguarding the Group’s reputation in the geographies for which they are responsible. the regional presidents also assume responsibility for oversight of the Group’s operating platform and coordinate activities across the Business Units in their regions.
The Business Unit Chief Executive Officers the BU Ceos are responsible for the management and performance of the respective Business Unit holding company as well as the respective Business Unit. the BU Ceos set the business and corporate agenda of the respective Business Unit, ensure high quality, performance-oriented and timely decision-making. they oversee the implementation of the decisions made and ensure the Business Unit executive Committees fulfil their responsibilities.
Board supervision of executive management Swiss re’s Board of Directors maintains effective and consistent oversight and monitors the execution of responsibilities it has delegated to executive management through the following control and information instruments.
Participation of Board members at executive management meetings the Chairman of the Board is invited to all meetings of the Group eC and Business Unit executive Committees and receives the corresponding documentation and minutes.
the presence of the entire Group eC was required for five Board meetings in 2015. all Group eC members attended these meetings. Selected Group eC members were invited to six further Board meetings. all of these Group eC members participated in the meetings, with the exception of two meetings where one member was excused each time.
a detailed summary of executive management participation in Board committee meetings is provided on page 95.
EVM Board Report the report provides factual financial highlights from an economic perspective, with a focus on historical value creation.
Global Outlook for Insurance, Reinsurance and Financial Markets the report describes trends and provides forecasts regarding the economic environment, the property & Casualty/ Life & Health (re)insurance markets and the financial markets.
Risk management Swiss re’s risk Management function provides regular risk reports to the Board of Directors, which are discussed in depth by the Finance and risk Committee. these reports cover Swiss re’s compliance with the Group’s risk tolerance criteria, major changes in risk and capital adequacy measures and a description of the Group’s main risk issues, including related risk management actions. the Finance and risk Committee regularly reports to the full Board of Directors.
Group Internal Audit GIa is an independent assurance function, assisting the Board of Directors and Group eC to protect the assets, reputation and sustainability of the organisation. GIa assesses the adequacy and effectiveness of the Group’s internal control system, and adds value through improving the Group’s operations.
GIa applies a risk-based approach, performing its own risk assessment as well as making use of risk assessments performed by the Group’s risk Management and other assurance functions (after reviewing the quality of the assurance work performed). Based on the results of the risk assessment, GIa produces an annual audit plan for review and approval by the audit Committee. the audit plan is updated on a quarterly basis according to the Group’s evolving needs. GIa provides formal quarterly updates on its activities to the audit Committee, which include audit results, the status of management actions required, the appropriateness of the resources and skills of GIa and any changes in the tools and methodologies it uses.
Michel M. Liès Luxembourg 61 Group Chief executive officer David Cole Dutch, american 54 Group Chief Financial officer John r. Dacey american 55 Group Chief Strategy officer Guido Fürer Swiss 52 Group Chief Investment officer agostino Galvagni Italian, Swiss 55 Ceo Corporate Solutions Jean-Jacques Henchoz Swiss 51 Ceo reinsurance europe, Middle east and africa
(eMea)/regional president eMea Christian Mumenthaler Swiss 46 Ceo reinsurance Moses ojeisekhoba nigerian, British 49 Ceo reinsurance asia/regional president asia patrick raaflaub Swiss, Italian 50 Group Chief risk officer J. eric Smith american 58 Ceo Swiss re americas/regional president americas Matthias Weber Swiss, american 54 Group Chief Underwriting officer thomas Wellauer Swiss 60 Group Chief operating officer 102 Swiss Re 2015 Financial report
Global reinsurance Forum ̤ Board member of Geneva association ̤ Member of Insurance europe’s reinsurance advisory Board (raB) ̤ Member of pan-european Insurance
Professional experience David Cole began his career in 1984 with aBn aMro. In 1999, he was appointed executive vice president and regional Head of risk Management for Latin america, located in Brazil. In 2001, he returned to amsterdam to assume Corporate Centre responsibility within Group risk Management. He became Chief Financial officer of Wholesale Clients (WCS) in 2002 and was appointed Senior executive vice president and Chief operating officer of WCS in 2004. In January 2006, he became Head of Group risk Management for aBn aMro Bank and in 2008 was named Chief Financial officer and Chief risk officer. David joined Swiss re in november 2010 as Deputy Chief risk officer and was appointed Group Chief risk officer and member of the Group executive Committee in March 2011. He was appointed Group Chief Financial officer as of May 2014.
University of Georgia, USa ̤ International Business program, nyenrode Universiteit, the netherlands
Professional experience John r. Dacey started his career in 1986 at the Federal reserve Bank of new York. From 1990 to 1998, he was a consultant and subsequently partner at McKinsey & Company. He joined Winterthur Insurance in 1998 and was its Chief Financial officer from 2000 to 2004 as well as member of their Group executive Board until 2007. From 2005 to 2007, he was Chief Strategy officer and member of their risk and investment committees. He joined aXa in 2007 as Group regional Ceo and Group vice Chairman for asia-pacific as well as member of their Group executive Committee. John joined Swiss re in october 2012 and was appointed Group Chief Strategy officer and member of the Group executive Committee as of november 2012. He also served as Chairman admin re® from november 2012 to May 2015.
Professional experience Before joining Swiss re, Guido Fürer worked for eight years in leading positions for the Swiss Bank Corporation/ o’Connor & associates in option trading and structured capital markets transactions. Guido joined the new Markets Division of Swiss re in 1997, focusing on alternative risk transfer. Between 2001 and 2004, he worked for Swiss re Capital partners with responsibility for european strategic participations. He was named Head of the Chief Investment office in 2008, with responsibility for Global asset allocation, portfolio Steering and portfolio analytics. Guido became Group Chief Investment officer and member of the Group executive Committee as of november 2012.
Professional experience agostino Galvagni joined Bavarian re, a former Swiss re subsidiary, in 1985 as a trainee in the fields of underwriting and marketing. He joined Swiss re new Markets in new York in 1998. agostino returned to Bavarian re in 1999 as a member of the Management Board. In 2001, he joined Swiss re in Zurich as Head of the Globals Business, and in 2005 was appointed to the executive Board to head the Globals & Large risks Division within Client Markets. In 2009, agostino was appointed Chief operating officer and member of the Group executive Committee. He was made Ceo Corporate Solutions in october 2010.
Chief executive officer reinsurance europe, Middle east and africa (eMea)/ regional president eMea
Professional experience Moses ojeisekhoba started his career in insurance as a registered representative and agent of the prudential Insurance Company of america in 1990. From 1992 to 1996, he was a risk and Underwriting Manager at Unico american Corporation. He then joined the Chubb Group of Insurance Companies as regional Underwriting Manager and in 1999 became Corporate product Development Manager in new Jersey and thereafter moved to London as Strategic Marketing Manager for Chubb europe. In 2002, he was appointed International Field operations officer for Chubb personal Insurance before becoming Head asia pacific in 2009, a position he remained in until he joined Swiss re. Moses joined Swiss re in February 2012 and was appointed Chief executive officer reinsurance asia, regional president asia and member of the Group executive Committee in March 2012.
Changes in the years 2015/2016 no changes have occurred in the composition of the Group eC during 2015.
Christian Mumenthaler, currently Ceo reinsurance, will become Group Ceo as of 1 July 2016, succeeding Michel M. Liès who will retire.
Other mandates, activities and vested interests In line with Swiss re Ltd’s articles of association the members of the Group eC may not hold more than five additional mandates of which no more than one additional mandate can be with listed companies. Mandates (i) in companies which are controlled by Swiss re Ltd or which control Swiss re Ltd, (ii) mandates held at the request of Swiss re Ltd or companies controlled by Swiss re Ltd as well as (iii) mandates in associations, charitable organisations, foundations, trusts, employee welfare foundations, investment companies, equity partnerships or limited liability partnerships are not subject to the above limitations. no member of the Group eC may hold more than five mandates as set out in (ii) above and not more than 15 mandates as set out in (iii) above. Mandates shall mean mandates in the supreme governing body of a legal entity which is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities that are under joint control are deemed one mandate.
Management contracts Swiss re has not entered into any management contract with any third party.
Statutory rules on participating in the General Meeting of shareholders the share whose owner, usufructuary or nominee is entered in the share register as having voting rights on a specific qualifying day determined by the Board of Directors entitles its holder to one vote at the General Meeting of shareholders.
the duties of the Independent proxy are determined by applicable laws, rules and regulations. the General Meeting of shareholders may remove the Independent proxy with effect as per the end of the General Meeting of shareholders. If the company does not have an Independent proxy, the Board of Directors shall appoint the Independent proxy for the next General Meeting of shareholders.
the Chairman of the General Meeting of shareholders determines the voting procedure. provided that the voting is not done electronically, voting shall take place openly on show of hands or by written ballot.
In accordance with the Federal act on Stock exchanges and Securities trading (SeSta), whosoever acquires equity securities, which added to equity securities already owned, exceed the threshold of 33⅓% of Swiss re shares with voting rights, either directly, indirectly or in concert with third parties, and regardless of whether these rights are exercisable or not, triggers a mandatory takeover offer for the outstanding Swiss re shares owned by all other shareholders.
the articles of association provide that the Board of Directors or, to the extent delegated to it, the Compensation Committee may decide on continuation, acceleration or removal of vesting, blocking or exercise conditions for the payment or grant of compensation based upon assumed target achievement, or for forfeiture.
alex Finn became lead auditor responsible for the auditing mandate of the former parent company, Swiss reinsurance Company Ltd, on 23 September 2011. With Swiss re Ltd becoming the new holding company of the Group, he also became lead auditor for the Swiss re Ltd audit mandate. Bret Griffin was appointed as further new lead auditor following the election of pwC as auditors by the annual General Meeting 2014.
Auditing fees pwC fees (excluding value add taxes) for professional services during the year ended 31 December 2015 were: ̤ audit fees: USD 33.2 million ̤ audit-related fees: USD 3.1 million ̤ Corporate Finance Services: USD 0.2 million audit-related fees (apart from corporate finance due diligence services) include, among other tasks, Solvency II model validation, accounting advice and regulatory reports.
Additional fees In addition to the auditing fees, pwC fees totaled USD 5.2 million (excluding value add taxes) during the year ended 31 December 2015, primarily relating to: ̤ Income tax compliance and related tax services: USD 1.9 million ̤ other fees: USD 3.3 million other fees include permitted advisory work related to a range of projects.
Information tools pertaining to the external audit Responsibilities the external auditor is accountable to the audit Committee, the Board of Directors and ultimately to the shareholders. the Board of Directors reviews the external auditor’s professional credentials, assisted in its oversight by the audit Committee.
Cooperation and flow of information between the auditor and the Audit Committee the audit Committee liaises closely with the external auditor; the lead auditors participate as advisers at all the audit Committee’s meetings. For more information, see page 95.
the external auditor provides the audit Committee with regular updates on the audit work and related issues as well as with reports on topics requested by the audit Committee.
Evaluation of the external auditor the audit Committee, which is responsible for recommending an audit firm to the Board of Directors for election at the annual General Meeting of shareholders, assesses the performance of the external auditor annually and presents its findings to the Board. this assessment is based on the external auditor’s qualifications, independence and performance.
Independence at least once a year, the external auditor provides a formal written statement delineating all relationships with the company that might affect its independence. any disclosed relationships or services that might bear on the external auditor’s objectivity and independence are reviewed by the audit Committee, which then recommends appropriate action to be taken by the Board.
Performance this assessment measures the external auditor’s performance against a number of criteria, including: understanding of Swiss re’s business; technical knowledge and expertise; comprehensiveness of the audit plans; quality of the working relationship with management; and clarity of communication. It is compiled based on the input of key people involved in the financial reporting process and the observations of the audit Committee members.
Special Auditor Swiss re Ltd’s articles of association foresee that the annual General Meeting may elect a Special auditor for a term of three years which will be responsible for the special audit reports that are required by law in connection with changes in capital. Currently there is no Special auditor elected.
Swiss re’s core business — managing global risk — makes us by necessity an information company. our information policy therefore goes well beyond legal requirements in establishing transparency in our communications and equal access to the facts for all investors and the public.
the official medium for publications of the company is the Swiss official Gazette of Commerce (Schweizerisches Handelsamtsblatt). In addition, we use our website to provide comprehensive, timely news and information on our activities as well as background discussion and analysis of issues relating to Swiss re’s business and the broader insurance and reinsurance industries. Investors and other stakeholders can subscribe to receive ad hoc disclosures and further corporate news automatically at swissre.com/media. our contact details are provided on page 280.
our Investor relations team holds regular meetings with institutional investors and analysts. at the 2015 Investors’ Day in Zurich in December, Swiss re unveiled its strategic framework equipping the company to position itself strongly vis-à-vis the current and future opportunities and challenges facing the insurance industry. at the heart of the framework is the effective and systematic allocation of capital to access new and existing risk pools and revenue streams. Swiss re also detailed how the framework will lay the foundation to meet its financial targets over the cycle. the presentations and conference call recordings from this event are also available on our website: investors/presentations
news release 22 october Swiss re to work with IBM Watson to harness the power of Big Data for reinsurance news release 29 october Swiss re reports very strong 12% rise in net income to USD 3.7 billion for the first nine months of 2015 news release, media conference call 11 november Swiss re’s share buy-back programme to begin on 12 november 2015 news release 8 December Swiss re confirms commitment to deliver long-term profitability and economic growth news release, media call 18 December preliminary sigma estimates for 2015: global catastrophes cause economic losses of USD 85 billion news release, sigma study
Date event 23 February 2015 annual results 16 March publication of 2015 annual report and 2015 evM results as well as of aGM 2016 invitation 22 april 152nd annual General Meeting 29 april First quarter 2016 results 29 July Second quarter 2016 results 3 november third quarter 2016 results 2 December Investors’ Day in Zurich
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CorporATE rEspoNsibiliTy our actions are guided by sustainable, long-term value creation and have a tangible link to our financial performance.
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reflecting the long-term view of our business, we seek to identify environmental and social issues that may undermine sustainable progress, and explore effective ways to address them. To do so, we use the deep understanding of re/insurance markets and the extensive risk expertise embedded in our company. in many parts of our business (eg client-facing units, risk management, stakeholder dialogue, logistics etc.), we have specific teams and processes to identify relevant sustainability-related challenges in these areas.
Swiss Re has a long-standing commitment to being a responsible company. A key element in our understanding of what this means is the desire to contribute to sustainable, long-term value creation. Or as we express it in our values: “Taking the long-term view, and playing our part in enabling sustainable progress — for stakeholders and society in general.”
Sector leader in the Dow Jones Sustainability Indices Swiss Re has been named as the insurance industry sector leader in the Dow Jones Sustainability Indices for 2015. This is the ninth time since 2004 that we have led the sector in these rankings. The award highlights our long-term commitment to sustainable business and our efforts to continuously and progressively embed sustainability into key business processes and operations.
gradually leads to shifts in the frequency, intensity, spatial extent, duration and timing of extreme weather events.
if climate change remains unchecked, the relative importance of the main drivers will thus gradually shift, with climate change accounting for an increasingly large share of natural catastrophe losses.
Natural catastrophes are a key risk in our property & Casualty (p&C) business. The damage caused by floods, storms, earthquakes and other natural disasters can affect millions of lives and the economies of entire countries. in 2015, the total worldwide economic losses from natural and man-made catastrophes were estimated at UsD 92 billion – of these, UsD 37 billion were insured.
̤ Man-made disasters – 10-year average total insured losses in USD bn, at 2015 prices
This general trend will continue. but crucially, losses will be further aggravated by climate change. The scientific consensus is that a continued rise in average global temperatures will have a significant effect on weatherrelated natural catastrophes. According to the special report on Extremes (srEX, 2012) and the Fifth Assessment report (Ar5, 2014) published by the intergovernmental panel on Climate Change (ipCC), a changing climate
While the effect of climate change will increase gradually over the coming decades, most of our business is renewed annually and our risk models are refined every few years. risks are normally covered for 12 months (up to five years for cat bonds). Thus, reinsurance premiums do not reflect expected loss trends over the next decades. rather, for underwriting and risk management purposes, our models provide an estimate of the current risk. but as natural catastrophe losses continue to rise as a result of the different factors described above, our forward-looking models will gradually reflect this trend, since they are updated and refined at regular intervals.
Through the Economics of Climate Adaptation (ECA) methodology we also analyse the effects of climate change on a longer timescale, which enables us to provide our clients with strategic advice and integral risk assessments of natural disasters and climate adaptation. ECA studies quantify today’s climate risks, the potential increase of populations and assets at risk due to economic development, plus the additional risk posed by climate change, with a time horizon of up to 30 years. in a second step, our studies identify cost-effective measures to adapt to these risks.
in 2015, we completed two new ECA studies, both at the request of the German Development bank (KfW). For san salvador, El salvador, we found that strengthening the buffer capacity of ecosystems through reforestation can reduce flood risk in poorer neighbourhoods by up to UsD 50 million over three decades. The study for the city of barisal, bangladesh revealed that reinforcing river embankments effectively protects citizens and reduces local flood risks by more than 50%, also under future climate scenarios. both ECA studies thus give decision-makers important information needed to integrate climate adaptation with economic development, paving the way for sustainable growth.
Adaptation to climate change requires effective risk transfer instruments that help our clients to cope with some of its effects. As we continuously adjust our natural catastrophe and weather solutions to reflect changes in the underlying risk, both are suitable for this purpose. on pages 121–122 we describe some recent examples of such products, along with two corresponding commitments we have made.
Awareness raising and advocacy We regularly share our insights into the risks created by climate change through our publications and stakeholder events, and support efforts to form a reliable international policy framework, eg by taking part in the United Nations’ Cop conferences.
switching to renewable energy is one of two main measures we have taken to reach our emissions reduction goals. Approximately 87% of the power we purchased in 2015 across the Group came from renewable energy sources. We are committed to raising this figure to 100%, but in some of the countries where we want to grow, reliable supplies of renewable energy are lacking. As a founding member of the rE100 initiative (therE100.org) we work together with a number of like-minded companies to improve this situation, by talking to policy-makers and regulators at the national and sub-national level. The rE100 group grew substantially in 2015 and now includes some of the largest companies in the world.
becoming more energy efficient in our own operations has been the second key measure of our Greenhouse Neutral programme. our goal is to continuously reduce energy intensity by at least 2% per year. recently we stepped up our efforts to create flexible office environments that offer our employees optimal working conditions while at the same time using space and resources more effectively. in combination with moving into more energy-efficient buildings, this enabled us to further reduce our energy intensity by 16% between 2013 and 2015. in 2015, the two measures contributed to workplace cost savings of 4%.
After an increase in 2014, total Co2 emissions per employee (FTE, full-time equivalent) dropped by 4% during 2015, mainly driven by a further reduction in the energy intensity of our offices and decreases in the emissions from commuting and business travel. The latter was due to the fact that our employees made fewer business trips in carbon-intense flight classes, even though the total distances they travelled increased slightly on average. (Detailed data for all reported emission sources will be disclosed in the 2015 Corporate responsibility report.)
However, there remains significant unmet demand for effective, commercially viable re/insurance protection. As the graph below illustrates, the gap between insured and uninsured losses remains substantial. Given this protection gap, we look beyond our established client base and traditional business model. in particular, we aim to expand re/insurance protection by focusing on underinsured risks, new markets, different clients and innovative risk transfer products.
some of the pioneering transactions we completed in 2015 are outlined below, ranging from large state-subsidised insurance funds to pilot projects in uncharted territory.
Although ten years have passed since a major hurricane last made landfall in Florida, the FHCF recognises that it is only a matter of time until one strikes again. As the 2005 hurricane season showed, the financial consequences for local insurers, and ultimately homeowners, can be severe. it is the task of the FHCF to ensure that insurers can pay claims from such extreme events and to reduce the impact on taxpayers.
Insured losses 10-year average insured losses 10-year average total economic losses
– 10-year average insured losses – 10-year average total economic losses source: swiss re Economic research & Consulting 120 Swiss Re 2015 Financial report
Strengthening earthquake resilience in Turkey in Turkey, we supported the Turkish Catastrophe insurance pool (TCip) to further improve insurance protection against earthquakes in istanbul. With a population of 14 million, the metropolis generates a significant share of Turkey’s GDp while living under the constant threat of severe earthquakes.
originally set up in response to the strong Kocaeli and Düzce earthquakes of 1999, TCip has done much over the years to improve insurance protection in the country. in addition to the support we provide through traditional reinsurance, in 2015 swiss re Capital Markets co-structured a UsD 100 million catastrophe bond sponsored by the TCip. Covering istanbul’s large metropolitan area, the three-year bond has a parametric trigger that will pay out if the specified earthquake conditions are met. it was well received by investors and ensures that TCip will have access to additional reconstruction funds in the event of a major earthquake.
Through ArC’s in-house risk modelling platform, Africa RiskView, the participating governments can assess the drought risk they face and decide how much they want to insure at what loss threshold. based on satellite rainfall data, payouts are then made automatically to the governments when the agreed drought thresholds are exceeded. To take part in the scheme, countries need to have contingency plans in place that show how payouts will be used to support the affected population.
in its initial 2014/2015 season, ArC offered drought insurance for a total of UsD 129 million to four governments: Kenya, Mauritania, Niger and senegal. less than a year into the programme, the latter three received payouts totaling more than UsD 26 million, following a severe drought in the sahel. in the 2015/16 season, further countries joined the risk pool, thereby increasing total coverage.
Helping to develop insurance markets in China Throughout 2015, we continued to take an active role in the expanding insurance markets of China. For example, we helped to develop China’s first weather index insurance programme to protect cotton production against low temperatures. it was launched as a pilot in the Xinjiang region, which grows 60% of the country’s cotton. While perils such as drought, hail and wind are covered by a government-subsidised agricultural insurance programme, this has not been the case for yield losses due to low temperatures. if the pilot providing protection of rMb 7.6 million (UsD 1.2 million) proves to be effective, it will be expanded to the whole region.
building on these experiences, we made a significant commitment to the United Nations at its Climate summit in september 2014. personally addressing the government leaders present at the summit, Group CEo Michel M. liès made the following pledge: “by the year 2020, swiss re commits to having advised 50 sovereigns and subsovereigns on climate risk resilience, and to have offered them UsD 10 billion against this risk.”
We have agreed with the United Nations to report publicly on the progress we make on this commitment. by the end of 2015, we had advised 13 sovereigns and sub-sovereigns on climate risk resilience and offered them a total of UsD 2.1 billion in re/insurance protection.
... to the Grow Africa Partnership in our efforts to bring risk protection to underinsured communities, the African continent — sub-saharan Africa in particular — has been a focus area in recent years. reflecting this engagement, we made an important commitment to the Grow Africa partnership (www.growafrica.org) in 2012. This initiative was launched by a number of organisations to promote public-private collaboration and investment in African agriculture. As most smallholder farmers in sub-saharan Africa have lacked access to insurance protection so far, addressing this problem is crucial to protect families’ livelihoods, facilitate economic development and reduce poverty.
our commitment to the Grow Africa partnership thus includes the following three elements: ̤ Give farmers in sub-saharan Africa access to tools such as weather and yield index insurance products; ̤ invest in resources equivalent to about UsD 2 million per year to support the development of sustainable agricultural risk management markets; ̤ provide agricultural insurance for up to 1.4 million smallholder farmers.
Working together with different partners, we helped to bring weather insurance to 1.6 million smallholder farmers in 11 sub-saharan countries by the end of 2015. The fact that the total has fallen from the 2 million recorded in the previous year is mainly due to changes in how one country participating in the African risk Capacity has structured its coverage under the programme: it has substantially revised its assumptions on the drought exposure of its farmers and reduced the percentage of farmers covered by the scheme.
UsD 2.1 billion Total amount of climate protection offered to sovereigns and sub-sovereigns since 2014 122 Swiss Re 2015 Financial report
our sustainability risk Framework is an advanced risk management instrument specifically designed to identify and address potentially negative effects of our transactions on local communities, workforces and the environment — helping us to safeguard our reputation in the process. The framework applies to all of our business transactions, re/insurance as well as investments, to the extent that we can influence their various aspects.
The sustainability risk Framework consists of: ̤ Eight policies on sensitive sectors or issues; ̤ The sensitive business risk (sbr)
process with an online assessment tool and a referral tool — due diligence mechanisms to assess our business transactions; ̤ Company exclusions; and ̤ Country exclusions beyond mere compliance with international trade controls.
Policies our sustainability risk Framework is based on the principles of respecting human rights and protecting the environment. Through detailed policies, the framework applies these principles to seven sectors in which we perceive major sustainability risks: the defence industry, oil and gas (including oil sands and hydraulic fracturing), mining, dams, animal testing, forestry, pulp & paper and oil palm, and nuclear weapons proliferation. (The list of key concerns addressed by the eight policies can be viewed at media.swissre.com/ documents/swiss_re_sbr_policy_ concerns.pdf)
The Sensitive Business Risks process Each of the eight policies of our sustainability risk Framework contains criteria and qualitative standards which define precisely when a transaction may present a “sustainability risk”. in 2015, we introduced a new online tool which enables our underwriters to screen all transactions for their possible impacts on the local environment and on the human rights of the affected people and workforces.
When the screening reveals any potential issues, the underwriters carry out further due diligence. Finally, the most critical transactions are referred to our team of sustainability experts, who then conduct targeted research to decide whether the transaction at hand is acceptable on ethical grounds.
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 from it. if there is disagreement about the recommendation, the case can be escalated to the next management level, ultimately to the Group Chief risk officer and the Group Executive Committee.
When making these decisions, we refer to internationally recognised ethical principles. swiss re is a signatory to the UN Global Compact, which derives its human rights principles from the Universal Declaration of Human rights, its labour principles from the ilo Declaration on Fundamental principles and rights at Work, its environment principles from the rio Declaration on Environment and Development and its anti-corruption principles from the United Nations Convention against Corruption.
Country exclusions swiss re also excludes certain countries from its business, beyond compliance with international trade controls (iTCs). The criterion for these country exclusions is a particularly poor human rights record. our goal is not to directly underwrite risks or make investments in entities that are based in these countries. At the end of 2015, the countries excluded from our business for human rights reasons were North Korea, somalia, sudan (North only) and syria. The underlying methodology has recently been revised and is being implemented in 2016.
Number of Sensitive Business Risk referrals 18% Excluded /critical country 17% oil and gas 10% other industry/issue 4% Human rights 3% Forestry, pulp & paper and oil palm 2% Animal testing 1% Environmental degradation 1% Multi-issue 1% Nuclear weapons proliferation proceed proceed with conditions
 Proceed  Proceed with conditions  Abstain  Not materialised 124 Swiss Re 2015 Financial report
The commitment and expertise of our employees is the foundation of our continued success. We aim to be a leading employer that attracts talented people from a broad range of disciplines and backgrounds. by fostering a culture of inclusion, we can leverage and grow the diversity of our workforce. our diversity & inclusion (D&i) vision is to “see, feel and live diversity — diversity of gender, race, ethnicity, generation, sexual orientation (lGbT), physical (dis)abilities and experiences – at all levels, functions and regions of swiss re”.
To foster diversity and inclusion across the whole organisation, we have set up a comprehensive strategic framework. backed by the Group CEo and the Group Executive Committee, our diversity & inclusion agenda is driven forward by a network of 35 D&i Champions, who are senior managers from a wide range of business areas, in addition to multiple geographicallybased D&i Councils and 25 inclusive employee networks at grassroots level worldwide.
The second pillar “smashing stereotypes, opening Minds” tackles stereotyping of any kind. it centres on raising awareness of the “unconscious bias” that every one of us has and which can unintentionally influence decision-making and behaviour.
Through awareness events as well as face-to-face and web-based training, employees participate in dialogues that increase self-awareness of unconscious biases such as those related to age, sexual orientation and gender. Training on inclusive leadership and how to overcome these unconscious biases has also been incorporated into our leadership development and manager training. last but not least, we have embedded “nudges” into our talent management toolkits for line managers: their purpose is to disrupt unconscious bias at each step in the decision- making process.
Advancing gender equality is an essential part of our Human Capital strategy. The initiatives described above support this goal by increasing awareness of unconscious bias and by fostering open-mindedness on how, when and where work gets done. This strategic component is benefiting both women and men, as it helps to improve productivity and work/life balance.
Report from the Compensation Committee 130 Compensation context and highlights in 2015 131 Compensation framework 133 Compensation governance 140 Compensation decisions in 2015 144 Report of the statutory auditor 152
Dear shareholders, i am pleased to share with you the Compensation Report from the Compensation Committee for the financial year ended 31 December 2015, which has been prepared in accordance with all applicable laws, rules and regulations.
the Compensation Committee is satisfied that this Compensation Report complies with all applicable laws, rules and regulations and provides a comprehensive view of the compensation framework at swiss Re and the 2015 compensation decisions.
All employees variable/performance-related variable/performance-related variabel/leistungsabhänging variabel/leistungsabhänging variabel/leistungsabhänging 1 Including Group CEO.
̤ 9% Variable compensation ̤ 11% income tax expense ̤ 45% net income paid out as dividend ̤ 35% net income added to retained earnings
Pay for performance the Compensation Committee ensures that executive management compensation is linked to the business performance of swiss Re by delivering a substantial portion of compensation in the form of variable and performancerelated incentives.
the Compensation Committee monitors how compensation is aligned with specific business metrics, including Us Gaap net income and eVm profit.
Financial strength Rating (standard & poor’s) aa- aa- aaaggregate compensation for all employees
Group eC members3,4 12 13 12 aggregate Group eC compensation (CHF
2 Disclosure includes all awards for a reporting year, ie the 2015 aggregated compensation values include the fair value of the Leadership performance plan (Lpp) granted in april 2015. the api for 2015 for members of the Group eC is subject to approval by the shareholders at the 2016 annual General meeting (aGm).
of which added to retained earnings within 1 FY 2013 and 2014 include special dividends of approximately UsD 1.6 billion and UsD 1.1 billion. FY 2015 is estimated based on average year-to-date CHF/UsD FX rates as of February 2016. the dividend is subject to aGm approval and the amount depends on the final number of dividend eligible shares and FX rates upon dividend pay out.
2 includes shares bought back between 12 november 2015 and 2 march 2016 as part of the buyback programme authorised at the 2015 aGm. the total amount represents an estimate converted at the 2015 average CHF/UsD exchange rate.
the binding votes on the compensation proposals for the Group eC and the members of the Board of Directors and the consultative vote on the 2015 Compensation Report are taking place at the aGm on 22 april 2016.
In addition to a continued focus on linking pay to performance, changes in 2015 mainly related to the implementation of the simplified Value Alignment Incentive (VAI) as well as the review of the performance conditions for the Leadership Performance Plan (LPP).
Compensation Policy Building on the overarching compensation principles included in swiss Re‘s articles of association, the compensation framework is captured within the swiss Re Group Compensation policy (the Compensation policy). the Compensation policy governs the compensation structure and processes across all functions and locations at swiss Re and is reviewed regularly.
the Compensation policy also contains guidance for the execution of individual compensation actions. the Compensation Committee has approved an authority matrix that defines the limits to which each level of management can authorise compensation payments. separate limits apply to each compensation element, thereby ensuring that all payments receive the appropriate level of approval. the Group Ceo or the Compensation Committee, as applicable, approves all compensation that exceeds the pre-set limits. the Group Ceo is not involved in his own pay decisions.
the Human Resources function conducts a regular self-assessment of swiss Re’s compliance with the Compensation policy. the Compensation Committee reviews this self-assessment and identifies potential areas of improvement. the Compensation Committee receives reports on compensation decisions as appropriate, including a comprehensive review of the effectiveness of the annual compensation review cycle.
to reflect best practices, the Compensation policy prohibits the use of any personal hedging strategies or remuneration and liability-related insurance that could undermine the risk alignment effects and economic exposure embedded in compensation arrangements.
Guiding principles swiss Re’s compensation framework is designed to attract, motivate and retain the qualified talent the Group needs to succeed globally and to create a tangible link between performance and pay.
swiss Re has several incentive programmes that reflect the long-term nature of the business: both the Vai as the deferred part of the annual performance incentive (api) and the Lpp aim to reward sustained performance rather than short-term results. these programmes support closer alignment of the interests of shareholders and employees.
Overview of the compensation components swiss Re aims for total compensation that is competitive in the market.
the illustration below shows a summary of swiss Re’s compensation and benefit components which are now further described.
Base salary Base salary is the fixed compensation paid to employees for carrying out their role and is established based on the
equal weighting to results-oriented and behavioural related performance criteria for all employees. api is awarded for both objectives achieved and the demonstration of desired behaviours.
a tapi is set based on multiple factors, but primarily on the role being performed and market benchmarks. similar to the determination of the base salary, the employee’s total compensation and overall pay-mix are taken into account, when setting the tapi. the possible payout for the api ranges from 0 to 2x tapi.
Settlement api is generally settled in cash. When the total api level for an employee exceeds a pre-defined amount, the award is split into two components: an immediate cash incentive payment (cash api) and a deferred api (Vai).
Annual Performance Incentive Purpose the api is a discretionary, variable component of compensation. Combined with the base salary, it provides competitive total cash compensation when both business and individual performance targets are achieved.
Structure swiss Re operates a target api (tapi) system along with a performance management framework that provides
Eligibility all employees all employees employees with an api at or above
Impact of share price on payout no no no yes yes yes no
business profit margin is the ratio of eVm previous years’ business profit to eVm capital allocated to previous years’ business in the current year.
additionally, clawback provisions apply in a range of events as defined in the Vai plan rules, enabling swiss Re to seek repayment of settled awards. examples of events are the participant’s conduct or acts which can be considered as malfeasance, fraud or misconduct.
the payout factor of the Vai is calculated based on the three-year average eVm previous years’ business profit margin for all prior underwriting years. eVm is swiss Re’s integrated economic valuation and reporting framework for planning, pricing, reserving, and steering the business (please refer to the eVm section on pages 55–56 of this Financial Report). the eVm previous years’
Plan duration the Vai supports a longer-term perspective by linking awards to performance over a three-year period.
the intention of the Lpp is to: ̤ focus participants’ energies on
earnings, capital efficiency and swiss Re’s position against peers, all of which are critical to sustained shareholder value creation; ̤ focus participants on long-term goals; ̤ attract and retain individuals of
Plan duration For Group eC members and GmDs, the duration of the Lpp is five years comprising a three-year vesting and performance measurement period and an additional two-year holding requirement. For all other participants, the vesting and performance measurement period is three years with no additional holding requirement.
Restricted Share Units the performance condition for RsUs is return on equity (Roe) with a linear vesting line. Vesting is at 0% for an Roe at the risk-free rate* and at 100% for an Roe at a predefined premium above the risk-free rate. the premium is set at the beginning of the plan period and for Lpp 2015 this premium has been set at 900 basis points above the risk-free rate. at the end of each year, the performance against the Roe condition is assessed and one third of the RsUs are locked in within a range of 0% to 100%. at the end of the three-year period, the total number of units locked in at each measurement period will vest (capped at 100%**).
Performance Share Units the performance condition for psUs is relative total shareholder return (tsR) measured over three years. the psUs vest within a range of 0% to 200%. the vesting curve starts with 50% vesting at the 50th percentile tsR relative to peers and is capped at 200%** vesting at the 75th percentile relative to peers. in case of a negative tsR over three years, the Compensation Committee retains the discretion to reduce the level of vesting.
a global footprint or a similar business mix as swiss Re. the peer group which is set at the beginning of the plan period includes aCe Ltd, allianz se, american international Group inc, amlin pLC, aXa sa, everest Re Group Ltd, Hannover Rueck se, muenchener RueckversicherungsGesellschaft aG, partnerRe Ltd, Reinsurance Group of america inc, RenaissanceRe Holding Ltd, sCoR se, XL Group pLC*** and Zurich insurance Group Ltd.
Grant the amounts disclosed under Lpp in the section compensation decisions in 2015 reflect the grants made in april 2015. this Lpp award will be measured over the period 2015 to 2017 and will vest in 2018.
Leadership Performance Plan * the annual risk-free rate is determined as the average of 12 monthly rates for 5-year Us treasury Bonds of the corresponding performance year and 10-year Us treasury Bonds for the Lpp 2016 and onwards.
** maximum vesting percentage excludes share price fluctuation until vesting. *** Catlin Group Ltd has now been integrated into XL Group pLC.
c o n d it io n s a d d it io n al t w o -y ea r h o ld in g
Total LPP award performance period 136 Swiss Re 2015 Financial Report
swiss Re also makes it possible for all Lpp participants to have shares sold or automatically settled on a net basis as applicable, to cover statutory tax and social security liabilities that may arise at vesting.
Global Share Participation Plan swiss Re offers its employees an opportunity to directly participate in the long-term success of the company by purchasing swiss Re Ltd shares (up to a maximum of CHF 7 000 per year and capped at 10% of base salary), through the Global share participation plan (Gspp). the company provides a 30% match on the number of shares held by employees at the end of the three-year plan cycle. the match is subject to forfeiture rules in case of termination of employment before the end of the plan cycle. the Gspp has the same core design in all locations.
Benefits swiss Re aims to provide a competitive package of employee benefits. Benefits are designed and implemented under a global framework, while appropriately reflecting differing local employment market conditions.
Group API pool funding process includes assessment of the financial performance versus targets, a multi-year view and review of the quality of earnings that then impacts the overall assessment. Kpis include Us Gaap eps/net income*, Roe, eVm profit and economic net worth
Overall Group assessment and proposal from management to the Compensation Committee, who retain final decision on adjustment. Reviewed proposal recommended for approval to the full Board of Directors
aggregate compensation is subject to aGm approval as outlined in the articles of association.
̤ stock ownership guidelines: the Group eC including the Group Ceo are subject to the stock ownership Guidelines (covered below).
in 2015, for the members of the Group eC including the Group Ceo, the total of the aggregate tapis was CHF 15.9 million and the aggregate Lpp 2015 award was CHF 12.2 million. For the Group Ceo the tapi was CHF 2.5 million and the Lpp award was CHF 2.0 million.
Stock Ownership Guidelines swiss Re has stock ownership Guidelines which articulate the levels of stock ownership expected of the Group eC including the Group Ceo. the guidelines are designed to increase the alignment of individual members of senior management with shareholders.
the fees for the Board of Directors are approved by the aGm in advance of the term of office for which the Board of Directors are elected. the Board of Directors receive no variable or performance-based compensation. the fee level for each Board member, subject to their re-election, is reviewed annually to ensure that it remains appropriate.
Compensation structure Group fees for the members of the Board of Directors are delivered 60% in cash, and a mandatory 40% in swiss Re Ltd shares, with a four-year blocking period.
Roles and time commitment the fees for the members of the Board of Directors reflect different responsibilities and committee memberships. the individual levels of pay therefore vary. Certain committees, such as the audit Committee as well as the Finance and Risk Committee, meet more frequently with longer meetings and hence have higher workloads. Chairpersons of these committees have to devote even more time to their tasks.
the Chairman of the Board of Directors devotes himself full-time to his role. in defining the position of Chairman as a full-time role, swiss Re applies best practice for highly regulated, complex financial institutions. the Chairman participates in developing the firm’s strategy, supervises the implementation of the agreed strategy and organises the work of the Board of Directors and its committees so these bodies can fulfill their responsibilities and authorities. the Chairman also has the important task, together with the Group Ceo, in representing the firm to outside parties including shareholders, industry associations, the media, political and regulatory authorities (including the Group regulator Finma), government officials and the general public, in all key locations where swiss Re operates.
the degree of in-depth oversight requires a high level of professional experience and expertise from each Board member in their field. swiss Re is confident that the skill set of its Board of Directors is well balanced, which in turn ensures an effective level of supervision.
Fee approval the aggregate compensation of the Board of Directors for the term of office between two subsequent aGms is subject to shareholder approval at the aGm as outlined in the articles of association.
Subsidiary boards of directors the majority of the members of the boards at the subsidiary level are swiss Re executives and they receive no additional fees for their services in this role. the non-executive members of the subsidiary boards receive their fees 100% in cash.
̤ is supported by the Compensation Committee in establishing and reviewing the Company’s compensation strategy and guidelines and performance criteria as well as in preparing the proposals to the aGm regarding the compensation of the members of the Board of Directors and the Group eC.
̤ Consists of at least three independent members of the Board of Directors, and each member of the Compensation Committee is elected individually at the aGm for a term of office until completion of the next aGm.
̤ is governed by a Charter approved by the Board of Directors, which defines the purpose, composition and procedural rules of the Compensation Committee, including its responsibilities and authorities for making proposals and decisions related to compensation of the members of the Board of Directors and the Group eC.
̤ is responsible for making recommendations and overseeing the design and implementation of compensation principles, policy, framework, plans and disclosure.
̤ mercer provides information about remuneration trends, market benchmarking and advice on executive compensation issues.
Authority for decisions related to compensation at the Board level are governed by the Articles of Association and the Corporate Bylaws including the Compensation Committee Charter (Charter). The main responsibilities of the Compensation Committee are summarised in the table on the right.
Roles and Responsibilities the articles of association of swiss Re Ltd (aoa) include rules on: ̤ the approval of compensation
̤ the agreements with members of the Board of Directors and the Group eC, external mandates and credits and loans (arts. 25 to 27).
Directors on topics discussed, decisions made and items for approval after each of these meetings. a summary of the topics dealt with by the Compensation Committee during the year is shown on page 142.
Board of Directors, aGm individual compensation of Group Board members Compensation Committee, Chairman of the Board of Directors2
Board of Directors3 maximum aggregate amount of fixed and long-term compensation of Group eC members
Compensation of Group Ceo Compensation Committee, Chairman of the Board of Directors
Compensation Committee4,5 short-term compensation pools and long-term incentive pools for the Group and Group eC (incl. Group Ceo)
Board of Directors3 1 Board members concerned abstain from voting. 2 other than the Chairman’s compensation. 3 Within the maximum aggregate amount of compensation approved by the aGm. 4 Within the maximum aggregate amount of compensation approved by the aGm and the supplementary amount available for changes in the Group eC as per the aoa respectively. 5 Board of Directors informed.
̤ Review and recommendation of the Lpp pool for the upcoming year January and February
̤ setting of the performance targets for variable compensation for the upcoming year February
̤ approval of individual compensation proposals for the Group eC1 February and april
Compliance and regulatory the Compensation Committee spends time reviewing materials relating to regulatory or statutory reporting. in addition, the structure of the Compensation Committee and its advisors is reviewed on an ongoing basis.
2 Within the maximum aggregate amount of compensation approved by the aGm.
The role of the Control Functions in compensation the role of swiss Re’s Control Functions (defined as Group Risk management, Compliance and Group internal audit) in compensation matters is well established.
Risk and Control Related Behaviour assessment of Group and business functions Focus on the link between compensation and risk and control related behaviours continues. the Control Functions annually perform a quantitative and qualitative assessment of each of these behaviours independently and summarise the outcomes in a consolidated Group report.
the reason for the increase in the number of Key Risk takers (141 in 2014) is driven by the need to introduce more sustainable and repeatable selection criteria based on clear rules rather than judgements. this revised definition ensures that all individuals with first line of defence activities that could significantly influence the risk profile of swiss Re are part of the assessment process.
Influence of the behavioural assessment on compensation the risk and control related behaviour assessment of Group and business functions provides additional input for helping determine the Group api pool and its allocation to each business function.
the Control Functions assess the risk and control related behaviour of each Key Risk taker and deliver a report to the business, the Group Chief Risk officer and the Chief Human Resources officer on an annual basis. this assessment serves as an additional factor when considering individual performance and compensation outcomes.
admin Re® reported strong results, driven by realised gains and one-off tax benefits. Gross cash generation was strong, with benefits from mortality assumption updates. admin Re® demonstrated strong progress against its strategy of being a leading closed life book consolidator in the UK through the acquisition of Guardian Financial services (Guardian) and the migration of HsBC policies to admin Re® platforms.
For further details on the Us Gaap financial performance, refer to page 24–45 in this Financial Report.
Economic value management financial performance the economic results in 2015 reflected solid underwriting performance in property & Casualty Reinsurance. the Life & Health Reinsurance underwriting result was also strong, driven by large transactions and favourable assumption changes. Corporate solutions generated a small eVm new business loss more than offset by previous years’ business profit from favourable prior-year development from the two most recent underwriting years. admin Re® reported an eVm loss mainly driven by the provision for the expected loss on the Guardian transaction, although this transaction is expected to generate a positive contribution to economic net worth over time, supporting swiss Re’s focus on long-term value generation. investment activities generated an eVm loss mainly driven by losses in principal investments and the impact of credit spread widening on the broader fixed income portfolio, primarily in Life & Health Reinsurance and admin Re®, where the focus is steady income as opposed to managing short-term volatility.
For further details on the economic financial performance, refer to the eVm section on pages 55–56 of this Financial Report.
Both the Compensation Committee and the full Board of Directors assessed the overall performance of swiss Re Group as having been markedly stronger in 2015 compared to 2014. Consequently, compensation pools for the Group executive Committee and other employees were set at higher levels than in 2014.
Value Alignment Incentive Vai performance is measured for the Group and each underlying business area. the performance factor for each participant is determined based on the business area that the participant was in at the time of award. in march 2015, the Group Vai 2011 (awarded in 2012) vested with a performance factor of 103%.
Leadership Performance Plan the Lpp award is generally part of total target compensation and is consistently linked to swiss Re Group’s future achievement of multi-year performance conditions (Roe and relative tsR), keeping the focus on the long-term success of the company. swiss Re made Lpp grants in 2015 consistent with this rationale.
the Lpp 2012 plan was granted on 1 april 2012 and vested on 31 march 2015. the RsU component is measured against an Roe performance condition. at the end of each year, the performance is assessed and one third of the RsUs are locked in within a range of 0% to 100%. at the end of the three-year period, the total number of units locked in vests. For the Lpp 2012 the average performance factor for the RsUs was just under 100% for the three-year period.
the psUs are based on relative tsR, measured against a pre-defined basket of peers and vest within a range of 0% to 200%. For the Lpp 2012 the performance factor for the psUs was 200% for the three-year period.
Aggregate variable compensation expense the Compensation Committee takes its decisions to award variable compensation on an economic value basis at the time of grant. in the financial statements, the recognition of deferred compensation follows the accrual principles as defined under Us Gaap. the financial statements reflect the aggregate value of variable compensation for the year under review as follows: Aggregate compensation of the Swiss Re Group the aggregate compensation for the performance years 2014 and 2015 for all employees was as follows: as of 31 December 2015 swiss Re Group employed 12 767 regular staff worldwide, compared to 12 224 employees at the end of 2014.
Aggregate compensation for Key Risk Takers the aggregate compensation of the individuals that held a key risk-taking position during the performance years 2014 and 2015 was as follows: Compensation Compensation desicions in 2015 performance Year 2014 Performance Year 2015
other payments severance payments1 1 0 1 0 1 severance payments in the table above include (i) payments under standard severance packages, (ii) other payments that are over and above what is contractually or legally required, and (iii) voluntary supplementary departure payments, but exclude similar legally permitted payments or garden leave which are aligned with local market practice for comparable positions in respect of amount, nature or duration. no severance payments were made to members of the Group eC.
̤ 28% Base salary and allowances ̤ 24% Cash api ̤ 21% Vai (paid after 3 years) ̤ 27% Lpp (paid after 5 years) Compensation mix for Group EC
Compensation decisions for members of governing bodies the section below is in line with swiss law and specifically with articles 14 to 16 of the swiss ordinance against excessive Compensation at public Corporations (the ordinance) which require disclosure of compensation paid to members of the Board of Directors and the Group eC. Compensation to members of the Board of Directors and the highest paid member of the Group eC is shown individually. this section (pages 147 to 151) is audited as required by the ordinance.
Base salary and allowances1 12 711 12 905 Funding of pension benefits 1 845 1 913
Total fixed and variable compensation4 42 612 47 360 Compensation due to members leaving5 1 Consisting of housing, schooling, lump sum expenses, child and similar allowances. 2 For 2015, subject to shareholder approval at the aGm 2016. For 2014, as part of the aggregate amount of shortterm variable compensation approved by the shareholders at the aGm 2015.
3 Disclosure reflects all awards for a reporting year, ie the 2014 value reflects the fair value of Lpp awards granted in
april 2014 and the 2015 value reflects the fair value of Lpp granted in april 2015. 4 Covers payments reflecting the time in the role as Group eC members. 5 For members leaving during the reporting period, this covers only legally or contractually required payments for the
company contributions to social security systems paid by swiss Re in line with applicable laws which amounted to CHF 3 802 474 in 2014 and CHF 3 755 675 in 2015.
Additional information on compensation decisions amounts reported under base salary and allowances include the base salary which is paid in cash, and benefits or allowances paid in cash.
Shares held by members of the Group EC the following table reflects total current swiss Re share ownership by members of the Group eC as of 31 December: Vested options held by members of the Group EC the following table reflects total vested option ownership by members of the Group eC as of 31 December: swiss Re granted options to senior management in the past and the last grant was made in 2006. the underlying strike price for the outstanding option series has been adjusted for special dividend payouts. the remaining vested options held by active members of the Group eC expired in 2015.
Weighted average strike price in CHF 74.34 n/a michel Liès, Group Ceo 15 000 0 matthias Weber, Group Chief Underwriting officer 3 500 0 148 Swiss Re 2015 Financial Report
Leadership Performance Plan units held by members of the Group EC the following table reflects total unvested Lpp units (RsUs and psUs) held by members of the Group eC as of 31 December: Loans to members of the Group EC as per art. 27 of the articles of association, credits and loans to members of the Group eC may be granted at employee conditions applicable for the swiss Re Group, with a cap on the total amount of such credits and loans outstanding per member.
the following table reflects total mortgages and loans for members of the Group eC as of 31 December: michel Liès, Group Ceo 133 290 99 490 David Cole, Group Chief Financial officer 60 160 49 755 John R. Dacey, Group Chief strategy officer, Chairman admin Re® 34 210 49 755 Guido Fürer, Group Chief investment officer 47 190 49 755 agostino Galvagni, Ceo Corporate solutions 60 160 49 755 Jean-Jacques Henchoz, Ceo Reinsurance emea 48 135 39 805 Christian mumenthaler, Ceo Reinsurance 60 160 49 755 moses ojeisekhoba, Ceo Reinsurance asia 48 135 39 805 J. eric smith, Ceo swiss Re americas 48 135 39 805 matthias Weber, Group Chief Underwriting officer 60 160 49 755 thomas Wellauer, Group Chief operating officer 60 160 49 755 patrick Raaflaub, Group Chief Risk officer 0 12 435
CHF thousands 2014 2015 total mortgages and loans to members of the Group eC 2 411 420 Highest mortgages and loans to an individual member of the Group eC1: Christian mumenthaler 1 895 n/a J. eric smith n/a 420 total mortgages and loans not at market conditions to former members of the Group eC 4 300 4 300 1 the member of the Group eC having the highest mortgage in 2014 transferred the mortgage to a bank in 2015.