Swiss Re was the leading (re)insurer of the World Trade Center, and the claims payments it made were correspondingly large. At the same time, however, Swiss Re made a name for itself far beyond the industry by successfully defending itself in court against excessive, even exorbitant claims – something that many other companies subsequently benefitted from.
Having only started the iptiQ business in 2016, its market-implied valuation has already grown to approximately USD 2 billion, based on the current growth trajectory and peer valuation. The growth of iptiQ is a perfect example of a new field of business for us which goes beyond traditional risk transfer. Namely, we are combining our risk knowledge with the smart use of data and technology to create insurance solutions for our partners.
The growth of the Asian middle class will foster spending and inherently increase protection needs. Insurance spending in China has increased in both life and non-life lines of business. As a result, China already became the second largest insurance market in the world in 2018. Additionally, most emerging markets demonstrate large insurance purchase potential.
Digitalisation and related technologies have fundamentally altered how we interact and manage our lives. This has enabled the creation of new offerings and the optimisation of processes across all sectors and industries. These technologies became even more important during and following the COVID-19 lockdowns – for example, by enabling growth in online business models.
Driving sustainable operations We lead by example and work to minimise the environmental impact of our operations. We have been a climate-neutral company since 2003. Bringing our CO2 emissions to net zero by 2030 is our next key target.
Demographic characteristics Global population data split by age, gender and target regions.
By design, the state is divided into multiple regions and a stepped payout feature allocates funds to regions where losses occur and in proportion to the amount of recorded rainfall.
To reach net zero, itʼs not enough to simply reduce emissions nor to offset emissions through carbon avoidance certificates. We need to do our best to reduce emissions and then remove the rest from the atmosphere. We will balance any unavoidable emissions by focusing on carbon removal via our insurance and investment activities, as well as by compensating for our operational emissions.
Originally launched as a white-label insurance platform for new life and health distributors, iptiQ significantly grew its new property and casualty business in 2020. Andreas Schertzinger led this work in EMEA, building new partnerships across Europe.
As our own understanding of what constitutes an inclusive organisation evolves, so too does our approach to I&D. In 2020, triggered by the Black Lives Matter movement, we increased our employee engagement on issues of race and ethnicity.
One example is the expansion of “Mosaic”, an employee resource group that promotes an inclusive and productive environment. The group aims to enhance the professional and personal development of people of colour and ethnic minority groups.
Inflation declined across major markets due to the crisis-driven blow to demand and oil prices (see the economic indicators table). This more than offset higher prices in segments that experienced scarcity or were affected by pandemic-related disruptions to supply chains.
Overall, underwriting results remained stable or even improved. On the one hand, the unprecedented pandemic containment measures caused estimated industry losses in the range of USD 50–80 billion1.
Market size in USD billions Estimated global premium income in 2020
Income/loss attributable to non-controlling interests –42 –54 29 Net income/loss attributable to common shareholders 727 –878 –
Liabilities and equity Unpaid claims and claim adjustment expenses 72 373 81 258 12 Liabilities for life and health policy benefits 19 836 22 456 13 Policyholder account balances 5 405 5 192 –4 Other reinsurance liabilities 17 775 19 552 10 Short-term debt 185 153 –17 Long-term debt 10 138 11 584 14 Other 13 232 15 169 15 Liabilities held for sale1 68 586 –
All Business Units executed on key strategic initiatives in 2020. Reinsurance achieved growth in its targeted areas. Corporate Solutions finished 2020 well ahead on its turnaround plan, while Life Capital successfully closed the sale of ReAssure and paid a USD 1.5 billion dividend to the Group.
Reinsurance reported a net loss of USD 176 million for the year, including COVID-19 claims impacts. Excluding the after-tax impact of COVID-19-related claims and reserves, the Business Unit’s net income would have been USD 2.1 billion compared with USD 1.3 billion in 2019.
Life Capital reported a net loss of USD 265 million in 2020, compared with a net loss of USD 177 million in 2019, driven by ongoing investment into the open book businesses’ growth and elipsLife’s underperformance due to reserve strengthening and COVID-19 impacts. COVID-19-related losses for Life Capital were minimal at USD 27 million. The net operating margin declined to ‒6.6% in 2020 from 2.4% in the same period of the previous year. Following the successful deconsolidation of ReAssure, Life Capital paid a dividend of USD 1.5 billion to Swiss Re Group.
Book value per share stood at USD 93.90 or CHF 83.00 at the end of 2020, compared with USD 100.64 or CHF 97.46 at the end of 2019. Book value per share is based on shareholders’ equity and excludes non-controlling interests.
Together with our clients, Reinsurance has navigated one of the most challenging years in our industry’s history. In 2020, we deployed our data and technological capabilities, transactional expertise and finanical strength to make sure our clients had the right solutions for their needs.
Lines of business Income before interest and income tax (EBIT) for the life segment decreased to USD –168 million in 2020, from USD 581 million in the prior year. The current-year result was impacted by COVID-19-related losses of USD 889 million, driven primarily by higher mortality claims in the US and the UK. Excluding this impact, the underlying result showed further signs of continuous improvements in the Americas mortality experience.
Economic net worth as of 1 January 35 993 36 138 Change in EVM methodology1 0 −492 Adjusted economic net worth as of 1 January 35 993 35 646 Total contribution to ENW 2 932 −434 Dividends and share buyback −2 590 −1 956 Other, including foreign exchange on economic net worth −197 395 Economic net worth as of 31 December 36 138 33 652 Common shares outstanding as of 31 December 290 654 942 288 976 399 Economic net worth per share in USD as of 31 December 124.33 116.45 1 The Group decided to adopt an intensity-based approach for modelling EVM capital of underwriting activities. The impact of the change in EVM methodology was recorded as an adjustment to the opening balance of 2020 economic net worth.
Business Unit structure and capital allocation Our peer-leading capital repatriation is supported by strong dividend payments from our Business Units. The cash dividends paid to Swiss Re Ltd since 2013 totalled USD 28.1 billion, while the total amount of capital returned to shareholders in the same period is USD 21.7 billion.
The risk management framework sets out how Swiss Re organises and applies its risk management practices to ensure that all activities are conducted in line with the principles and limits mandated by the Group Risk Policy.
• Transparency – Risk transparency, knowledge-sharing and responsiveness to change are integral to the risk control process. The central goal of risk transparency is to create a culture of mutual trust, and reduce the likelihood of surprises in the source and potential magnitude of losses.
Alternative risk measurements — 99% and 99.5% VaR — increase to USD 17.2 billion and USD 20.1 billion, respectively.
The ongoing pandemic presents challenges not only for the insurance industry, but for the entire global economic system. Swiss Re is a strong proponent of coordinated responses to COVID-19 as it believes that only through collaboration among governments, regulators and industry, can societies effectively manage events of such magnitude.
The following significant long-term emerging risks are deemed particularly important for Swiss Re’s business:
Mitigation measures Swiss Re’s Digital Governance Framework considers all activities where digital services are introduced, irrespective of whether it is Business IT or Operational Technology. Therefore, minimum baseline standards are being ensured for the secure usage of edge computing devices. Swiss Re regularly monitors and reassesses cyber security robustness against latest standards and threats, including the maintenance of an inventory of IoT devices.
• The Swiss Code of Best Practice for Corporate Governance (Swiss Code) of 28 August 2014, issued by economiesuisse, the Swiss business federation.
Significant shareholders The following table provides a summary of the disclosure notifications of major shareholders holding more than 3% of voting rights: Shareholder Number of shares % of voting rights and share capital
Limitations on transferability and nominee registrations Free transferability The company maintains a share register for the registered shares, in which owners and usufructuaries are entered. Persons acquisition registered shares will, upon application, be entered in the share register without limitation as shareholder with voting power if evidence of the acquistion 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.
Professional experience Raymond K.F. Ch’ien was Group Managing Director of Lam Soon Hong Kong Group from 1984 to 1997. From 1999 to 2011, he was Chairman of CDC Corporation, a software development company, and from 2003 to 2015 Chairman of MTR Corporation Limited, which operates a major public transport network in Hong Kong. From 1997 to 2020, Raymond K.F. Ch’ien also served as an Independent Nonexecutive Director of the Hongkong and Shanghai Banking Corporation Limited.
fulfilling its duties. The Board has delegated certain responsibilities, including the preparation and execution of its resolutions, to the following six committees: • Chairman’s and Governance Committee • Nomination Committee • Audit Committee • Compensation Committee • Finance and Risk Committee • Investment Committee
Vice Chairman The Vice Chairman performs the duties of the Chairman if the Chairman is prevented from performing his duties or in a potential conflict-of-interest situation. The Vice Chairman may prepare and execute Board resolutions at the request of the Board and liaises between the Board and the Group EC in matters not reserved to the Chairman.
• Recognition of COVID-19 impact in terms of complexity of losses, as well as successful adjustments to work policies, procedures and sign-offs
Compensation Committee 7 meetings4 2¾ hours Group CEO, Group Chief Human Resources Officer, Head Reward, advisors5
Group CEO, Group CFO, Group CRO, Group CUO, Group CIO, Group COO, Group CLO, Group Treasurer, CEO Reinsurance, CEO Corporate Solutions, CEO Life Capital6, Group Company Secretary
4 In addition, eight decisions by circular resolution. 5 The law firm Niederer Kraft Frey Ltd (NKF) and the human resources consulting firm Mercer provided support and advice for compensation issues during the reporting year.
Member of the Group EC since: 1 January 2011, 2 November 2012, 3, 4 July 2019, 5 September 2018, 6 Jonathan Isherwood was appointed as Regional President Americas and a member of the Group EC with effect from 14 August 2020, 7 January 2016, 8 March 2012.
Professional experience Thierry Léger started his career in the civil construction industry before joining Swiss Re as an engineering underwriter in 1997. In 2001, he moved to Swiss Re New Markets, providing non-traditional solutions to insurance clients. Between 2003 and 2005, he was a member of the executive team in France as leader of the sales team. From 2006, Thierry Léger assumed increasing responsibility for Swiss Re’s largest clients, ultimately becoming the Head of the newly created Globals Division in 2010 and a member of the then existing Group Management Board. In 2013, Thierry Léger became Head of Life & Health Products Reinsurance. As of January 2016, he was appointed Chief Executive Officer Life Capital and a member of the Group Executive Committee. With effect from 1 September 2020, Thierry Léger assumed the role of Group Chief Underwriting Officer.
The 2020 Annual General Meeting of Swiss Re Ltd took place pursuant to the provisions of the Federal Council’s Ordinance 2 on Measures to Combat the Coronavirus (COVID-19-Ordinance-2). As a result, shareholders could not attend the Annual General Meeting in person. Shareholders were able to exercise their right to vote and to participate in elections indirectly, via representation by the Independent Proxy.
19 February Annual results 2020 18 March Publication of Annual Report 2020 and 2020 EVM results as well as the AGM 2021 invitation 16 April 157th Annual General Meeting 30 April Release of first quarter 2021 key financial data 30 July Half-year 2021 results 29 October Release of nine months 2021 key financial data 1 December Investors’ Day, Zurich
Compensation Committee activities During 2020, the Compensation Committee met seven times (including one extraordinary meeting) and passed eight decisions by circular resolution. The Compensation Committee assessed the impact of COVID-19 on compensation and closely monitored market developments, company and employee needs as well as shareholder and other external stakeholder expectations.
Shareholders will also be asked to support this Compensation Report in a consultative vote. The Compensation Committee is satisfied that this Compensation Report complies with applicable laws, rules and regulations.
Aggregate compensation for all employees (CHF millions)2, 3 2 001 2 086 4% 1 937 –7% Group EC members4 14 16 15 Aggregate Group EC compensation (CHF thousands)2, 4 44 253 47 002 6% 45 043 –4%
a regular self-assessment and assesses the Compensation Policy against FINMA requirements and other relevant regulations as appropriate.
For VAI performance outcomes over past years, please refer to page 135 of this Financial Report.
Global Share Participation Plan Swiss Re offers its employees an opportunity to directly participate in the long-term success of the Group by purchasing shares (for up to a maximum of CHF 7 000 per year of a plan cycle and capped at 10% of base salary), through the Global Share Participation Plan (GSPP). Swiss Re 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 in case of termination of employment before the end of the plan cycle.
• Is responsible for making recommendations to the Board of Directors and overseeing the design and implementation of compensation principles, policies, framework, plans and disclosure.
Swiss Re Group and Business Units In 2020, the Group’s US GAAP and Economic Value Management (EVM) results were significantly impacted by COVID-19related losses, affecting the performance of all Business Units in the Group. The vast majority of the Group’s COVID-19 losses was driven by affirmative non-damage business interruption, higher mortality claims as well as cancelled or postponed events. Throughout 2020, Swiss Re showed a strong underlying performance across the Group. Property & Casualty Reinsurance delivered strong new business generation with higher premiums earned and price increases and a strong investment result supported Life & Health Reinsurance’s solid performance. Corporate Solutions’ turnaround is ahead of plan and Life Capital successfully closed the ReAssure sale.
US GAAP financial performance Property & Casualty Reinsurance’s performance was heavily driven by COVID19 -related losses as well as large natural catastrophe events and man-made losses, partially offset by strong new business generation with increased premiums earned, supported by increased prices. Life & Health Reinsurance’s performance benefited from realised gains on fixed income securities and solid underwriting results due to active portfolio management, while still significantly impacted by COVID-19 losses.
F in a n ci a l a ss e ss m e n t (s te p
Overall, the Board of Directors was pleased with the Group CEO’s effective management of the Group despite challenging conditions in the wake of the COVID-19 pandemic.
Other payments to members of the Group EC During 2020, no payments (or waivers of claims) other than those set out in the section “Compensation disclosure and shareholdings in 2020” were made to current members of the Group EC or persons closely related.
4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election. 5 Includes fees for duties on the board of Luxembourg Group companies.
Renato Fassbind, Vice Chairman, Lead Independent Director, Chair Audit and Nomination Committees 31 143 35 513 Raymond K.F. Ch’ien, member 21 345 18 067 Sergio P. Ermotti, member2 n/a 874
PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
At the business level, the Business Units Reinsurance and Corporate Solutions, the iptiQ Division and Public Sector Solutions implement the Group Sustainability Strategy, including the Climate Action Plan.
1% All other perils11% Convective storms 4% Flood28% Tropical cyclone 2% Windstorm
For both property and agriculture lines of business, our models show that with the 4 See IPCC Fifth Assessment Report, chapter 11, and the IPCC Special Report on the impacts of global warming of 1.5°C.
Classification of climate-change effects and their relevance for the re/insurance industry
While there is significant uncertainty associated with climate projections, especially when it comes to storms making landfall, increases in the frequency and severity of tropical storms are likely. Natural variability is expected to remain the dominant factor in the short and medium term (2025 and 2030). In the longer term (2050), a rise in sea levels will lead to non-linear increases in storm surge risk for coastal areas. Additionally, warmer temperatures will lead to more extreme rainfall events that may increase flood risk.
Finally, the overall size of the re/insurance market will depend on future economic growth rates.
Modelled without flood protection measures. Source: Swiss Re 1000-year zone 500-year zone 250-year zone 100-year zone 50-year zone 1000-Jahres-Zone 500-Jahres-Zone 250-Jahres-Zone 100-Jahres-Zone 50-Jahres-Zone
This transition does not, however, automatically translate into a financial risk for us. For example, motor insurance is one of the most important business lines of the primary insurance sector globally. According to Swiss Re’s sigma database, in 2020 it represented approximately 21% of global non-life direct premiums written, but for the reinsurance sector the share is much lower at 14%.
Physical risks conclusion: Although the physical risks arising from climate change can have significant economic consequences over time, especially from a wider societal perspective, they represent a limited and manageable risk for Swiss Re.
• Increased litigation risks may become relevant for casualty insurance (eg general liability, D&O insurance)
6 Corporate bond and listed equities: weighted average carbon intensity = (company CO2e emissions/company revenue) * (investment/portfolio); government bonds: weighted average carbon intensity = (country CO2e emissions /country GDP PPP-adjusted) * (investment/portfolio).
Business solutions that tackle energy transition risks Examples of recent transactions that tackle energy transition risks include: Enabling the expansion of offshore wind in Taiwan: Swiss Re Corporate Solutions and Reinsurance joined forces to provide both primary and reinsurance cover for a 640-megawatt offshore wind project off the coast of Taiwan. Construction of the wind farm began in 2020, and once it is completed in 2021, the Yunlin wind farm will consist of 80 wind turbines, which are expected to power approximately 605 000 households.
24% BREEAM “Excellent” 25% BREEAM “Very Good” 51% Not certified 13% LEED “Gold” 30% LEED “Silver” 57% Not certified
In principle, it would be possible for Swiss Re to compute the potential long-term effects caused by climate change on AEL based on today’s re/insurance book. However, given the many factors that shape our future re/insurance books, a stand-alone climate-change scenario analysis would be incomplete for the following reasons: Looking at climate effects in isolation would mean ignoring the other factors that will shape Swiss Re’s future re/insurance book and thus also our future AEL. These factors include our strategy and risk appetite
We are committed to investing our assets responsibly in a controlled and structured way by integrating ESG considerations along the entire investment process. For more information on our approach to ESG integration, refer to our Responsible Investing homepage (www.swissre.com/ responsible-investing) as well as pages 45–51 of our Sustainability Report 2020.
• Real estate: ongoing portfolio improvements through refurbishments and energy usage optimisations
Carbon footprint of our corporate bond portfolio The US corporate bond portfolio remains below its corresponding benchmark in terms of weighted average carbon intensity, given its continued underweight in high carbon intensity holdings.
Carbon footprint of our investment portfolio In line with TCFD guidelines, we monitor the carbon footprint of our corporate bond and listed equity portfolio on an ongoing basis. For the carbon footprints of these portfolios, we use the metric “weighted average carbon intensity”, which defines the portfolio carbon intensity based on relative investment share. We also monitor any coal-related activities in our private equity investments.
Net premiums written 4 39 649 39 827 Change in unearned premiums –1 675 494
2 In the third quarter of 2020, the Group completed the sale of ReAssure to Phoenix. 3 Impact of Accounting Standards Update in 2019. Please refer to the Annual Report 2019 for more details.
Cash flows from financing activities Policyholder account balances, unit-linked and with-profit business: Issuance/repayment of long-term debt 3 614 1 071 Issuance/repayment of short-term debt –2 205 –190 Purchase/sale of treasury shares –946 –199 Dividends paid to shareholders –1 659 –1 765 Transactions with non-controlling interests 634
The Group does not discount life and health claim reserves except for disability income claims in payment and mortality claims paid out in the form of an annuity. These claims are recognised at the estimated present value of the remaining ultimate net costs of the incurred claims.
In October 2018, the FASB issued ASU 2018-17, “Targeted Improvements to Related Party Guidance for Variable Interest Entities”, an update to Topic 810, “Consolidation”. The standard requires that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The Group adopted the ASU retrospectively on 1 January 2020. The adoption did not have an impact on the Group’s financial statements.
In November 2018, the FASB issued ASU 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606”, an update to Topic 808, “Collaborative Arrangements”. The amendments in this ASU provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606 “Revenue from Contracts with Customers”. In particular, the update requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, the presentation of the transaction together with revenue recognised under Topic 606 is precluded. The Group adopted ASU 2018-18 on 1 January 2020 retrospectively to the date of initial application of Topic 606. The adoption did not have an impact on the Group’s financial statements.
The Group presents four core operating business segments: Property & Casualty Reinsurance, Life & Health Reinsurance, Corporate Solutions and Life Capital. The presentation of each segment’s balance sheet is closely aligned to the segment legal entity structure. The assignment of assets and liabilities for entities that span more than one segment is determined by considering local statutory requirements, legal and other constraints, the economic view of duration and currency requirements of the business written and the capacity of the segments to absorb risks. Interest expense is based on the segment’s capital funding position. The tax impact of a segment is derived from the legal entity tax obligations and the segmentation of the pre-tax result. While most of the tax items can be directly attributed to individual segments, the tax which impacts two or more segments is allocated to the segments on a reasonable basis. Property & Casualty Reinsurance and Life & Health Reinsurance share the same year-to-date effective tax rate as both business segments belong to the Reinsurance Business Unit.
Net premiums written 20 882 12 734 4 253 1 780 39 649 Change in unearned premiums –1 607 101 –87 –82 –1 675
Income/loss before interest and income tax expense/benefit 813 1 491 –761 81 308 –434 1 498 Interest expenses –352 –445 –40 –72 –114 434 –589
Income/loss before income tax expense/benefit 461 1 046 –801 9 194 0 909 Income tax expense/benefit –65 –147 143 –133 62 –140
Claims ratio in % 82.2 78.8 68.9 78.7 Expense ratio in % 27.2 33.0 29.8 30.3 Combined ratio in % 109.4 111.8 98.7 109.0
Premiums earned, thereof: Direct 14 3 837 2 211 6 062 Reinsurance 19 577 13 836 910 95 34 418 Intra-group transactions (assumed and ceded) 265 205 –265 –205 0
Premiums earned before retrocession to external parties 21 570 15 137 4 425 2 144 24 43 300
Retrocession to external parties –828 –1 410 –426 –460 –3 124
Incurred related to: Amortisation of deferred expense on retroactive reinsurance and impact of commutations −23 −36
Corporate Solutions 5 217 Consolidation –4 986 Impact of acquisition accounting –79 Other short duration contract lines 523
As of 31 December, the DAC were as follows: 2019 Property & Casualty Life & Health Corporate USD millions Reinsurance Reinsurance Solutions Life Capital Group Items Total
Opening balance as of 1 January 804 1 505 –491 1 014 1 818 Effect of acquisitions/disposals and retrocessions –1611 2032 203 42 Amortisation –108 –220 46 –174 –282 Interest accrued on unamortised PVFP 32 103 –15 88 120 Effect of change in unrealised gains/losses –13 –13 –13 Effect of foreign currency translation 10 43 –16 27 37 Reclassified to held for sale –1 156 476 –680 –680
Realised gains/losses – fixed income securities 89 135 92 72 Realised gains/losses – equity securities 3 333 279 –2 566 –283 Realised gains/losses – other 90 9 –8 –9
Gross amount of recognised liabilities for repurchase agreements and securities lending 3 923
Interest rate contracts –444 –2 –446 Foreign exchange contracts –410 –410 Equity contracts –10 –331 –23 –364 Credit contracts –237 –237 Other contracts –2 –316 –318
254 Swiss Re | Financial Report 2020 9 Derivative financial instruments The Group uses a variety of derivative financial instruments including swaps, options, forwards, credit derivatives and exchange- traded financial futures in its trading and hedging strategies, in line with the Group’s overall risk management strategy. The objectives include managing exposure to price, foreign currency and/or interest rate risk on planned or anticipated investment purchases, existing assets or liabilities, as well as locking in attractive investment conditions for future available funds.
As of 31 December 2019 and 2020, the Group recorded an accumulated net unrealised foreign currency remeasurement gain of USD 1 895 million and USD 248 million, respectively, in “Other comprehensive income - Foreign currency translation“. These offset translation gains and losses on the hedged net investment.
Maturity of long-term debt As of 31 December, long-term debt as reported above had the following maturities: Due in 2021 152 Due in 2022 804 856 Due in 2023 840 916 Due in 2024 2 573 2 271 Due in 2025 802 1 157 Due after 2025 6 287 6 384 Reclassified to liabilities held for sale –1 320
Long-term debt issued in 2020 In June 2020, Swiss Re Finance (UK) Plc., a subsidiary of Swiss Re Ltd, issued 32-year guaranteed subordinated fixed rate reset step-up callable notes, which are callable after 12 years. The notes have an aggregate face value of EUR 800 million, with a fixed coupon of 2.714% until the first optional redemption date (4 June 2032). The notes are guaranteed on a subordinated basis by Swiss Re Ltd.
In July 2020, Swiss Re Finance (UK) Plc., a subsidiary of Swiss Re Ltd, issued 15-year guaranteed subordinated fixed rate reset callable notes, which are callable after 5 years. The notes have an aggregate face value of SGD 350 million, with a fixed coupon of 3.125% until the first optional redemption date (3 July 2025). The notes are guaranteed on a subordinated basis by Swiss Re Ltd.
Gross deferred tax asset 5 230 6 472 Valuation allowance –505 –395 Unrecognised tax benefits offsetting benefits on loss carryforwards 1 2
Total deferred and other non-current tax liabilities –5 663 –6 740
Total recognised in other comprehensive income, gross of tax –36 43 40 47
278 Swiss Re | Financial Report 2020 20 Significant subsidiaries and equity investees
Singapore Swiss Re Asia Holding Pte. Ltd., Singapore USD 0 100 f Swiss Re Asia Pte. Ltd., Singapore USD 3 002 100 f Swiss Re Principal Investments Company Asia Pte. Ltd., Singapore USD 0 100 f
Life and health funding vehicles The Group participates in certain structured transactions that retrocede longevity and mortality risks to captive reinsurers with an aim to provide regulatory capital credit to a transaction sponsor through the creation of funding notes by a separate funding vehicle which is generally considered a VIE. The Group’s participation in these transactions is generally limited to providing contingent funding support via a financial contract with a funding vehicle, which represents a potentially significant variable interest in the funding vehicle. The Group does not have power to direct activities of the funding vehicles and therefore is not a primary beneficiary of the funding vehicles in these transactions. The Group’s maximum exposure in these transactions equals either the total contract notional or outstanding balance of the funding notes issued by the vehicle, depending on the specific contractual arrangements.
The Group is not exposed to losses in the aforementioned investment vehicles, as the investment risk is borne by the policyholder.
Non-consolidated VIEs The following table shows the total assets and liabilities on the Group’s balance sheet related to VIEs in which the Group held a variable interest but was not the primary beneficiary as of 31 December: Fixed income securities available-for-sale 1 187 1 084 Equity securities at fair value through earnings 113 100 Policy loans, mortgages and other loans 1 735 1 518 Other invested assets 2 160 2 359 Investments for unit-linked and with-profit business 17 131 145 Funds held by ceding companies 25 Reclassified to assets held for sale –17 590
Opinion In our opinion, the consolidated financial statements of the Group for the year ended 31 December 2020 present fairly, in all material respects, the financial position, the results of operations and the cash flows in accordance with accounting principles generally accepted in the United States of America (US GAAP) and comply with Swiss law.
 Evaluating the appropriateness of any significant adjustments made by the Group to P&C loss reserve estimates.
 Testing the Group’s methodology and methods, focusing on changes to L&H actuarial methodology and methods during the year, by applying our industry knowledge and experience to check whether the methodology and methods are consistent with recognised actuarial practices and reporting requirements.
Share capital decreased by CHF 1 million to CHF 32 million as of 31 December 2020 and legal profit reserves decreased by CHF 998 million to CHF 4 314 million as of 31 December 2020 resulting from the cancellation of own shares.
Non-current assets Loans to subsidiaries and affiliated companies 911 1 241 Investments in subsidiaries and affiliated companies 5 20 409 19 150 Total non-current assets 21 320 20 391
Income tax expense As of 1 January 2020, due to the abolishment of the holding company exemption on a cantonal/ communal level as part of the Swiss Tax Reform, Swiss Re Ltd is subject to ordinary income taxation at cantonal/ communal and federal level. In 2019, as a holding company incorporated in Switzerland, Swiss Re Ltd was exempt from income taxation at cantonal/ communal level.
Dividends from subsidiaries and affiliated companies are indirectly exempt from income taxation (participation relief).
Realised losses on sale of investments 157 13 Valuation adjustments on derivative financial instruments 1 14 32 Valuation adjustments on investments in subsidiaries and affiliated companies 1 702 1 982 Investment management expenses 1 0 Other interest expenses 19 45 1 The derivative financial instruments are included in Receivables from subsidiaries and affiliated companies and Payables to subsidiaries and affiliated companies.
the AGM less the amount of any dividend resolved by such AGM. 3 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020. 4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election.
We are all looking back on a challenging year. The COVID-19 pandemic has had a devastating impact on individuals, families and economies – and at the time of writing unfortunately continues to do so. True to our vision of making the world more resilient, we have supported clients and partners during this difficult time by paying covered losses, by sharing insights and through our product innovations.
Our strategy Our Group strategy helps us meet our financial targets and make the world more resilient.
Swiss Re first detected the potential long-term challenges posed by climate change some 30 years ago. Consequently, it has become our most important sustainability issue: For a re/insurer, climate change constitutes a key topic because it leads to an increase in the severity and a change in the patterns of natural catastrophes such as windstorms, floods, excessive rainfall, heatwaves and drought. In combination with growing asset concentrations in exposed areas and more widespread insurance protection, this will cause a rise in average losses.
Fo u n d a tio n Fo ste rin g re silie n t so cieties: Drivin g su sta ina ble op er at io ns compliance
A key question for any company that seeks to advance sustainability is what this means in the context of its own business and industry: Which topics are “material” to achieving this goal?
services (see page 14). In 2021, we plan to develop an approach on how to better integrate this topic into our Group Sustainability Strategy.
stakeholders”, page 57 • “Engaging our people”, page 74 • “Fostering resilient societies: Swiss Re
• Published the SONAR 2020 report on emerging risks, including special features on carbon capture and a low-carbon future (page 43).
• 81% of our employees agree that Swiss Re provides an open and inclusive work environment (page 78).
• 90% of employees agree their colleagues act ethically and with integrity (page 83).
• Swiss Re expert volunteers supported our partners for more than 9 400 hours in 2020 (page 89).
Biodiversity and Ecosystem Services (BES) Index integrated into CatNet® Our BES Index, launched in 2020, is fully integrated into Swiss Re’s online natural hazard information and mapping system, CatNet®. The BES Index enables our clients – businesses and governments – to factor in biodiversity and ecosystem issues into economic decisionmaking.
The commitment aims to accelerate the implementation of risk management and risk financing solutions as a means to strengthen adaptation measures and the resilience to climate risks in exposed countries. In 2020, the Tripartite formed 13 country teams, with three more in the exploration phase. Swiss Re contributed to the projects alongside ten other industry members.
premiums. To support its customers, Women’s World Banking has worked with its local microinsurance partners to allow customers to pay their premiums in arrears, ensuring they can maintain their health coverage in times of financial difficulty.
One unexpected outcome of the pandemic was a drop in claims, rather than an increase. As the pandemic raged on, overwhelmed hospitals limited nonCOVID -19 admissions, some customers were unable to reach hospitals due to a lack of transportation options during lockdown, and others avoided hospital visits out of fear of becoming infected. In response, Women’s World Banking has been encouraging its local partners to waive premiums or offer coverage for home births, for example.
Women’s World Banking customers Manal Sayed Ahmed runs her own embroidery business in Egypt.
New technologies are changing the way life insurers write business, handle sensitive data and engage customers. This is particularly true in China’s large, broker-driven insurance market, where the sheer number of brokers and volume of insurance transactions require a streamlined, automated process. At the same time, tech-savvy local consumers increasingly expect a better insurance buying experience. Not only do they wish to avoid a cumbersome application process, they also expect customisable products, more convenient transactions and quicker decisions. And in 2020, demand for user-friendly mobile solutions only accelerated as the outbreak of the COVID-19 pandemic prevented insurance agents from meeting with customers in person.
As part of our comprehensive risk management, we address sustainability and emerging risks. For this, we have developed specific tools and know-how.
• Started to measure the carbon footprint of our direct insurance portfolio, applying a methodology developed with the CRO Forum.
The transactions identified as the most critical are transferred through the SBR Referral Tool to Swiss Re’s team of sustainability experts, who conduct in-depth research to decide whether the transaction at hand is acceptable according to the policies of the Sustainable Business Risk Framework.
Main concerns addressed by the policies of our Sustainable Business Risk Framework
In partnership with other re/insurers, we are also developing risk assessment tools designed to help the industry better understand and manage sustainability risks. One of these ongoing partnerships is the UNEP FI Principles for Sustainable Insurance (PSI). In 2020, we jointly organised and held a four-part virtual event series on “Sustainability Leadership in Insurance”. You can find more information about this series and other collaborations with partner organisations on pages 54–55.
Including ESG criteria along the investment process makes economic sense as it improves risk-adjusted return profiles and reduces downside risks, especially for long-term investors. Managing risks arising from climate change is another important part of our Responsible Investing approach, and comprises setting targets, taking actions, measuring and reporting.
Our Responsible Investing strategy relies on the three cornerstones Enhancement, Inclusion and Exclusion, of which Enhancement is the most meaningful for Swiss Re.
USD 1.7bn of government bonds invested in green, social & sustainability bonds1
The cutting-edge risk knowledge generated in this way is shared through publications, client programmes and conferences. Swiss Re Institute incorporates successful Swiss Re brands such as the sigma publication series, the annual SONAR report (see page 43) and the Centre for Global Dialogue.
UNEP FI PSI-led collaborative initiative to develop Insurance Sustainable Development Goals Through this United Nations-backed alliance, leading re/insurers have committed to supporting the achievement of the SDGs by 2030 via their insurance portfolios through a set of Insurance Sustainable Development Goals (iSDGs). The alliance will: map existing re/ insurance products and solutions and how they already support the SDGs, identify gaps where new products and solutions are needed, and assess potential trade-offs between positive and negative contributions.
While such losses had been relatively benign in 2019, our sigma issue underlined that the combination of socio-economic factors and climate change will lead to increased losses from weather events in the future, causing a major threat to global resilience.
The index for the first time gives the re/ insurance industry the possibility to incorporate BES data into their risk assessment, thus helping to preserve BES, which are vital to societies’ resilience and a sustainable future.
Led by digitally based technologies, the face of insurance is changing rapidly. The first of our sigma editions published in 2020 set out to explain what this means for the industry and to present a potential roadmap for progress.
Secondly, the levy will secure the funds required to purchase removal certificates from high-quality, ie impactful, durable and scalable carbon removal projects. Since carbon removal is still a nascent industry, this new way of compensating emissions comes at a price, and securing sufficient funding is crucial.
3. Average price of high-quality carbon removals by 2030 is ~USD 200 per tonne of CO2: thus needs to be the level of our Carbon Steering Levy in 2030, our net-zero target year 4. By 2050, scientists estimate an average price of ~USD 100 per tonne of CO2 removed
Obtain 100% of power from renewable sources by the end of 2020 (RE100)
Climate change has been Swiss Re’s most important sustainability issue for some 30 years. It is a key topic for a re/insurer because it leads to more extreme and more frequent weather events as well as other negative impacts.
2 The figures for 2020 have been strongly impacted by COVID-19 and are not indicative of Swiss Re‘s future environmental performance.
Finally, we have managed to improve office utilisation by creating more flexible and modern office environments that offer our employees optimal working conditions while using space and resources more effectively.
Our commitment to improving energy efficiency (kWh/FTE) continues beyond 2020. We aspire to achieve a 2% efficiency gain per year against the 2018 baseline. This translates into a target of 13% for 2025 and 22% for 2030.
In the years 2016 and 2019, respectively, we began partnerships with EcoVadis and IntegrityNext, two collaborative platforms for sustainable supply chain management that cover a wide range of screening criteria across the topics of environmental impacts, human rights, labour practices, ethics and sustainable procurement. These collaborations allow us to assess the sustainability performance of our suppliers more systematically with the help of key performance indicators and to engage them in improvements. They also help us reduce and manage potential sustainability risks in our supply chain.
>33 000 COyou2 subsidies granted to our employees between 2007 and 2020
• Origination transformation: a global sales training programme designed to upskill around 1 400 employees
LearningOne was crucial to supporting employees and line managers with training opportunities during the COVID-19 pandemic. We held over 367 distinct virtual sessions in 2020.
Managing performance Our performance management approach supports our aim for a high-performance culture in which our individual and team goals, as well as our behaviour, are aligned with our firm’s purpose and business strategy. We continue to improve our approach to performance and introduced a new, more continuous and ratings-free performance management approach in 2020. This new approach focuses on frequent feedback conversations to foster individual growth, real-time improvement and faster, smarter adaptation to business needs. We are also experimenting with new reward concepts in agile teams.
• We offer mental health first aid training. Employees learn to identify risk factors and warning signs for mental health and addiction concerns, how to help someone in both crisis and non-crisis situations, and where to turn for help. We have trained over 100 people to date and are committed to training 5% of our employees (ie 750) in the longer term.
Our inclusive culture is one of Swiss Re’s greatest strengths, as confirmed by our employee survey: 81% of our employees agreed that we have an inclusive environment that is open to individual differences (2019: 68%). To further support our inclusion ambitions, we offered employees the opportunity to voluntarily self-identify based on race/ethnicity, sexual orientation and gender identity for the first time in our employee survey in 2020. We first introduced the collection of this sensitive demographic information in the UK, South Africa, the US and Switzerland as a pilot initiative, which was well received by our employees with relatively high levels of consent (between 60%–82%).
• LGBTI+: We equalised leave, gift and insurance benefits where no legal or regulatory barriers exist and improved the external visibility of our activities.
Listening to our employees We foster a culture of open dialogue and actively encourage employees at all levels to provide their feedback in regular, personal dialogue between employees and managers, and through regular employee surveys. This enables us to continually assess our progress in fostering an engaging, open and inclusive work environment and an agile, commercial culture.
The Code also offers practical guidance and examples for deciding the appropriate course of action and solving ethical dilemmas. It further sets out how all employees should react when they observe a possible breach of the principles in the Code. All employees are obligated to uphold both the letter and spirit of the Code, its policies and standards, and the Group’s corporate governance principles in their daily business activities, and to respect and obey applicable laws and regulations in all jurisdictions where we do business. In 2020, 90% of Swiss Re employees agreed their colleagues act ethically and with integrity (2019: 86%).
Policies Our Code addresses the following key compliance topics under two headings, “Our responsibility towards one another and Swiss Re” and “Our responsibility towards our business partners and society”: Our responsibility towards one another and Swiss Re • Business information and information technology • Communication • Conflicts of interest • Diversity and inclusion and fair and equal treatment • Fraud • Health, safety and security • Intellectual property
Money laundering, international trade controls and economic sanctions (ITC) The Code draws attention to the risk of becoming involved in money laundering and emphasises the importance of due diligence. It additionally commits us to adherence to all applicable international trade and economic sanctions to protect us against entering into prohibited business arrangements.
In addition, we deliver mandatory global eLearning sessions to employees to remind them as well as increase their understanding of our key compliance risks and policy requirements. Last year, global eLearning sessions were delivered on insider trading, fair competition, and anti-bribery and corruption. Over the period from 2017 to 2020, we also conducted global eLearning sessions on the following compliance risks: • Fraud • Anti-money laundering • Data protection • International trade controls and economic sanctions • Conflicts of interest • Licensing and permanent establishment • Bribery and corruption • Fair competition • Insider trading
• After further analysis of green energy assurances for grid power in the UK, we have changed the calculation method for our offices in this region to using market-based factors for electricity emissions. This caused a sharp drop of 46% in overall emissions per employee (kg/FTE) for power.
2. Beyond accounting for the removal of our ReAssure offices in the UK, we made corrections concerning locations where we have clarified that we do not consume heating fuels.
Absolute carbon emissions total CO2e tonnes 74 972 82 944 83 361 33 735 –55%
European Commission’s Technical Expert Group on Sustainable Finance (TEG) The TEG assists the European Commission in the development of a unified classification system for sustainable economic activities, an EU green bond standard, methodologies for low-carbon indices and metrics for climate-related disclosure.