Growth has decelerated in the US and other major economies. A reversal in monetary policy by major central banks has led to a decline in long-term bond yields, and a rally in global equity markets in 2019.
Generally, underwriting results in the largest non-life markets improved slightly, based on lower catastrophe losses and moderately improving underwriting conditions.
Market size in USD billions Estimated global premium income in 2019
Gross premiums written increased by 16.0% to USD 42.2 billion in 2019, driven primarily by growth in P&C Re.
The P&C Re combined ratio increased to 107.8% in 2019 from 104.0% in the prior year, mainly due to unfavourable prior-year development and a higher large loss burden.
2019 was a difficult year for Corporate Solutions. However, we are actively managing risk exposure and correcting the price deficiencies to ensure a more focused and profitable portfolio going forward.
The return on equity was –34.1% in 2019, compared with –19.4% in 2018.
For example, the ability to aggregate and augment large pools of natural catastrophe exposure data from different sources allows Swiss Re to expand its ability to model and understand risk. In this new approach, data-mining techniques and clustering algorithms are being used to enrich risk characteristics of individual property exposures (such as age or construction type, for example). The underlying exposure database with more than 12 billion individual records is fully integrated with Swiss Re’s proprietary risk modelling landscape, positioning us well for superior risk selection and advanced accumulation tracking. Strategic collaboration with open-source partners, for example the Global Earthquake Model (GEM) public-private partnership, provides further access to data and ensures timely consideration of leading scientific perspectives as we advance our own views on risk.
We expect broadly stable to improving property and casualty reinsurance prices as a result of rising claims and a significant reduction of available retrocession capacity. Underlying primary commercial line price increases have gained strength and broadened throughout 2019. Due to our long-standing underwriting experience as a leading reinsurer, we are well positioned to navigate fast-developing risk environments.
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 World and Europe, FTSE4Good, Euronext Vigeo World 120, Bloomberg Gender Equality Index and MSCI ESG Leaders index families. In July 2019, Swiss Re received a AAA rating on the MSCI ESG assessment.
Expenses −90 −66 −17 −36 −44 −252 Net outperformance (underperformance) 308 −513 −46 −460 −232 0 −943
Profit margin – new business, % −3.1 8.2 −2.2 11.8 1.2
Profit margin – previous years’ business, %1 11.7 1.8 −36.4 23.1 3.5 Profit margin – investments, % −2.4 −19.4 −11.9 −16.5 −18.3 1 The overall previous years’ business profit margin for the Reinsurance Business Unit was 5.7%.
Grow the regular dividend with long-term earnings, and at a minimum maintain it
Taking and managing risk is central to Swiss Re’s business. All risk-related activities, regardless of the legal entity in which they are undertaken, are subject to the Group’s risk management framework. Consequently, the framework is applied at Group level and cascaded to all legal entity levels, whereby the three entities Swiss Reinsurance Company Ltd (SRZ), Swiss Re Corporate Solutions Ltd (SRCS) and Swiss Re Life Capital Ltd (SRLC) represent the top-level legal entities for the Business Units Reinsurance, Corporate Solutions and Life Capital.
The Group CRO is appointed as the principal independent risk controller of Swiss Re. He is a member of the Group Executive Committee and reports directly to the Group CEO as well as to the Board’s Finance and Risk Committee. The Group CRO also advises the Group Executive Committee, the Chairman or the respective Board Committees, in particular the Finance and Risk Committee, on significant matters arising in his area of responsibility.
The Group CRO leads the independent Risk Management function, which is responsible for risk oversight and control across Swiss Re. It thus forms an integral part of Swiss Re’s business model and risk management framework. The Risk
Risk Appetite Framework In the context of business strategy and planning, the risk appetite statement facilitates discussions about where and how Swiss Re should deploy its capital, liquidity and other resources under a risk/return view, while risk tolerance sets clear boundaries to risk-taking.
The Group’s financial risk derives from financial market risks as well as from credit risk. Key drivers of financial market risk are credit spread and equity risk. Credit risk is mainly driven by the default risk of capital market products and credit and surety business.
Risk developments Higher life and health risk mainly reflects the impact of lower interest rates and the appreciation of the Canadian dollar and British pound against the US dollar. The overall increase is further driven by business growth in Asia and the US, resulting in higher exposure to critical illness, lethal pandemic, mortality trend and lapse risk.
Valuation risk Financial valuation risk is managed by internal and external portfolio managers, who ensure that valuations remain in line with the market. In addition, Swiss Re has a second line function within Financial Risk Management that independently assess valuations and valuation techniques; this team performs independent price verification for financial risk positions to confirm that valuations are reasonable and ensure there are no material misstatements of fair value in Swiss Re’s financial reports. The results of the independent price verification process are reviewed by the Asset Valuation Committee. Summary results are regularly reported to Executive Management and the Board at Group and legal entity level. In addition, Swiss Re’s external auditor conducts quarterly reviews as well as a comprehensive year-end audit of controls, methodology and results.
We apply a tailored governance approach throughout the Group, taking into account the nature, size and complexity of our Group and subsidiaries.
• All other members of the Board of Directors were individually re-elected by the Annual General Meeting 2019 for a further one-year term of office as members of the Board of Directors: Renato Fassbind (Vice Chairman and Lead Independent Director), Raymond K.F. Ch’ien, Karen Gavan, Trevor Manuel, Jay Ralph, Joerg Reinhardt, Eileen Rominger, Philip K. Ryan, Sir Paul Tucker, Jacques de Vaucleroy, Susan L. Wagner and Larry Zimpleman. The Board of Directors consists of 13 members.
Capital As a result of the cancellation of shares repurchased under the share buy-back programme that was completed on 15 February 2019, the fully paid-in share capital of SRL as of 31 December 2019 amounted to CHF 32 740 470.40. It is divided into 327 404 704 registered shares, each with a par value of CHF 0.10.
Existing shareholders’ subscription rights are excluded. The then current holders of the conversion and/or option rights granted in connection with Equity-Linked Financing Instruments shall be entitled to subscribe to the new registered shares. Subject to the Articles of Association, the Board of Directors may decide to restrict or exclude existing shareholders’ advance subscription rights with regard to these Equity-Linked Financing Instruments. Such a decision may be made in order to issue Equity-Linked Financing Instruments on national and/or international capital markets or by way of private placements in connection with (i) mergers, acquisitions (including takeover) of companies, parts of companies, equity stakes (participations) or new investments planned by the company and/or Group companies, financing or re-financing of such mergers, acquisitions or new investments, or (ii) improving the regulatory and/or rating capital position of the company or Group companies.
On 6 June 2018, SRL placed with the market via a repackaging vehicle USD 500 000 000 of six-year exchangeable notes, which may be stock-settled at the option of SRL. Subject to the conditions of the notes, noteholders may exchange their notes for ordinary shares of SRL at an exchange price of USD 111.6987 (adjusted from the initial exchange price of USD 115.2593). The exchange price is subject to further adjustment in certain circumstances described in the conditions of the notes. To economically offset the settlement of a noteholder-initiated exchange, SRL purchased matching call options on SRL shares with a portion of the proceeds. Consequently, no new SRL shares will be issued upon a noteholderinitiated exchange. The settlement and delivery of these notes took place on 13 June 2018. For further details please see Note 7 on page 294. Assuming all of the notes were exchanged at the request of noteholders, 4 476 327 registered shares of SRL would have to be delivered (corresponding to 13.67% of the existing share capital).
Walter B. Kielholz was elected to the Board of Directors of Swiss Reinsurance Company Ltd in 1998 and to the Board of Directors of SRL in connection with its formation in 2011. He was Vice Chairman from 2003 to April 2009 and has been Chairman of the Board of Directors since May 2009. He chairs the Chairman’s and Governance Committee.
Educational background Business Finance and Accounting degree, University of St.Gallen, Switzerland
R e g u la to ry m at te rs
Members • Renato Fassbind, Chair • Joerg Reinhardt • Jacques de Vaucleroy • Susan L. Wagner 2019 key focus areas • Succession planning: Steered the succession planning processes for the Chairman and the
• approves the Annual Report of both SRL and the Group
In addition, reports are submitted to the Board committees, such as: • Regular updates on claims • Regular updates on reserving/reserve movements • Group Legal Report (quarterly) • Compliance Report (quarterly) • Group Internal Audit Report (quarterly) • Group Tax Report (annually) • Group Risk Update (quarterly) • Derivative Use Update (semi-annually) • Report on Capital, Liquidity and
Members of the Group Executive Committee The Group Executive Committee (Group EC) consisted of the following 14 members as of 31 December 2019: Name Nationality Age Function Appointed in current role
Professional experience Guido Fürer commenced his career at Swiss Bank Corporation/O’Connor & Associates in 1990, where he held leading positions in option trading at its capital market division. He joined Swiss Re in 1997 as Managing Director at Swiss Re New Markets, and from 2001 to 2004 he worked for Swiss Re’s Private Equity unit. In 2004, he joined Asset Management with responsibility for tactical asset allocation prior to assuming the role of Head of Strategic Asset Allocation. Guido Fürer has led Swiss Re Group Asset Management since his appointment as Group Chief Investment Officer and a member of the Group Executive Committee in November 2012. In 2019, he additionally assumed the roles of Swiss Re Country President Switzerland and Chairman of the Swiss Re Stategic Council.
Professional experience J. Eric Smith worked in various roles in property and casualty insurance at Country Financial for more than 20 years. He then joined Allstate in 2003, where he rose to the rank of President, Financial Services. He moved to USAA in 2010 as President USAA Life Insurance Co. J. Eric Smith joined Swiss Re in July 2011 as Chief Executive Officer Reinsurance Americas and as a member of the then existing Group Management Board. He was appointed Regional President Americas and member of the Group Executive Committee in January 2012.
Audit-related assurance services 6.1 11.0 Services relating to corporate finance transactions 0.0 0.3 Tax related services 0.6 0.3 Other non-audit services 0.2 0.7
It informs the Audit Committee about any differences of opinion between the external auditor and management encountered during the audits or in connection with the preparation of the financial statements.
The Chairman conducts an annual corporate governance roadshow to visit and engage in an ongoing dialogue with Swiss Re’s largest shareholders. Throughout the year, our Investor Relations team, often joined by our Executive Management, holds regular meetings with institutional investors and analysts, including roadshows, conferences and calls.
Dear shareholders, As the Chair of Swiss Re’s Compensation Committee, I am pleased to share with you Swiss Re’s Compensation Report for the financial year ended 31 December 2019.
Group business performance 2019 Key considerations for annual compensation decisions continue to cover a combination of US GAAP and Economic Value Management (EVM) based business results, qualitative factors and Swiss Re’s pay-for-performance approach. Compensation decisions were made considering Swiss Re’s overall performance for the reporting year in which the Group’s US GAAP and economic performance was negatively impacted by higher-thanexpected natural catastrophe and manmade losses as well as by increased claims in US casualty, partially offset by a strong investment result.
disability and death. • Be competitive in the markets where Swiss Re competes for talent. • Connect with Swiss Re values and enhance engagement.
• The annual and binding approval by the AGM of the maximum aggregate amounts of compensation of members of the Board of Directors and of the Group EC (Article 22).
• Co-developed a first-of-its-kind telematics solution, giving insurers a better and more personalised risk assessment, while supporting safer driving behaviour.
The value of all outstanding deferred compensation (determined for VAI at grant and for LPP using the fair value at grant) for all employees at 31 December 2019 amounted to CHF 239 million (compared to CHF 270 million in 2018), whereof CHF 103 million will be payable in cash (compared to CHF 132 million in 2018) and CHF 136 million in shares (compared to CHF 138 million in 2018).
Annual Performance Incentive Cash Annual Performance Incentive3 13 877 300 14 395 306
6 Disclosure reflects all awards for a reporting year, ie the 2018 value reflects the fair value of LPP awards granted in April 2018 and the 2019 value reflects the fair value of LPP awards granted in April 2019. Any awards granted in 2019 and then forfeited at a later point in the same year are not included.
will occur after the publication of this report, the closing share price at year-end 2019 of CHF 108.70 was used to estimate the realised value.
Other payments to members of the Group EC During 2019, no payments (or waivers of claims) other than those set out in the section “Compensation disclosure and shareholdings in 2019” were made to current members of the Group EC or persons closely related.
Members of the Board of Directors Total 2018 Fees and allowances in cash Fees in blocked shares Total 2019
The 2030 Sustainability Ambitions of our strategy cover three focus areas where we can have a significant positive impact in terms of supporting sustainability and strengthening resilience.
Climate-related litigation risks We identified potential climate-related litigation risks as an emerging risk over a decade ago and assessed its potential relevance through our own research. After years of decline, climate change litigation activities against large greenhouse gas emitters have increased recently. However, associated insurance coverage disputes have remained stable.
The processes we use to identify, assess and manage climate- related risks are integrated into our risk management, underwriting and asset management.
Aligning our carbon intensity We have recently started to develop a carbon business steering mechanism. The introduction of our coal policy formed the first part of this. Additionally, in 2019, we began to work on a carbon footprint methodology, which was also conducted through the CRO Forum. Once finished, this will help us steer the overall carbon footprint embedded in our re/insurance businesses. Ultimately, it will support us in decarbonising our business model and in reaching net-zero emissions by 2050 on the liability side of our balance sheet, a goal that we committed to in 2019 by signing the UN Global Compact Business Ambition for 1.5°C, building on our earlier Paris Pledge for Action.
Total comprehensive income attributable to common shareholders –2 625 4 054
190 Swiss Re | Financial Report 2019 a) Business segments – income statement For the year ended 31 December 2018 Property & Casualty Reinsurance
204 Swiss Re | Financial Report 2019 4 Premiums written For the years ended 31 December 2018 Property & Casualty Reinsurance
222 Swiss Re | Financial Report 2019 6 Deferred acquisition costs (DAC) and acquired present value of future profits (PVFP)
A reconciliation of other-than-temporary impairments related to credit losses recognised in earnings was as follows: Balance as of 1 January 91 80 Credit losses for which an other-than-temporary impairment was not previously recognised 5 5 Reductions for securities sold during the period –12 –24 Increase of credit losses for which an other-than-temporary impairment has been recognised previously, when the Group does not intend to sell, or more likely than not will not be required to sell before recovery 2 2 Impact of increase in cash flows expected to be collected –4 –3 Impact of foreign exchange movements –2 1
Derivative financial instruments – assets 1 662 –1 184 478 –2 476 Reverse repurchase agreements 5 185 –3 096 2 089 –2 061 28 Securities borrowing 171 –150 21 –20 1
As of 31 December 2019, a tax benefit of USD 6 million arises from revaluing the Swiss deferred assets and liabilities to the new Swiss statutory tax rate (combined federal and cantonal) of 19.7% (from 21% for ordinary companies and 7.8% for holding companies), under the Swiss tax reform. Accordingly, the revaluing reduced the Swiss deferred tax assets by USD 35 million and the Swiss deferred tax liabilities by USD 41 million (net USD 6 million). Moreover, the transitional impact of Swiss tax reform had led to the recognition of an intangible deferred tax asset of USD 142 million (included within “Other“ above) which has been fully offset by a valuation allowance.
Income taxes paid in 2018 and 2019 were USD 740 million and USD 611 million, respectively.
The Group continually evaluates proposed adjustments by taxing authorities. The Group believes that it is reasonably possible (more than remote and less than likely) that the balance of unrecognised tax benefits could increase or decrease over the next 12 months due to settlements or expiration of statutes. However, quantification of an estimated range cannot be made at this time.
Equity securities at fair value through earnings 1 082 205 1 287 Short-term investments 43 43 Derivative financial instruments 36 36 Real estate 4 756 760 Other assets 95 698 793
PSUs Non-vested at 1 January 438 448 664 378 279 780 0 Granted 312 236 Forfeited –2 949 –54 856 –22 725 –9 545 Vested –435 499 –432 –116 –124
Singapore Swiss Re Asia Holding Pte. Ltd., Singapore USD 0 100 f Swiss Re Asia Pte. Ltd., Singapore USD 253 100 f
In relation to the matters set out opposite, our substantive testing procedures included the following, which are applicable for both the standard reserving and large and/or structured transactions:  Testing the completeness and accuracy of underlying data utilised by the Company’s actuaries in estimating P&C loss reserves.
We assessed and tested the design and operating effectiveness of selected key controls relating to the application of actuarial methodology, data collection and analysis, as well as the processes for determining the assumptions used by the Company in the valuation of actuarially determined L&H reserves.
 Challenging the Company’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.
Cash dividends from subsidiaries and affiliated companies 3 562 2 230 Realised gains on sale of investments 19 155 Valuation adjustments on derivative financial instruments 1 – 35 Income from short-term investments 0 1 Income from loans to subsidiaries and affiliated companies 113 131 Investment management income 0 0 Other interest revenues 84 77
1 Please refer to Note 11 “Assets held for sale” for more details.
The Reinsurance Business Unit remains the core engine of profitability, delivering a market-leading combination of shareholder returns and capital repatriation for the Group. Long-term performance of Property & Casualty Reinsurance (P&C Re) remains strong, despite significant natural catastrophe claims in recent years. Life & Health Reinsurance (L&H Re) is delivering peer-leading returns underpinned by global diversification and strong growth in Asia. In line with our strategy, we are profitably expanding our Reinsurance business through our capabilities in underwriting large transactions and providing innovative solutions. At the same time, we are also accessing corporate and retail market risk directly, through our Corporate Solutions and Life Capital Business Units, respectively. Asset Management is consistently generating
Acquisition costs for the Group amounted to USD 7.8 billion in 2019, up from USD 6.9 billion in 2018, driven primarily by growth in P&C Re.
Core is our traditional business, focused on transferring an insurance risk from a client’s balance sheet to our own, while also deploying technology to make processes more efficient. Transactions are large and complex deals that we can complete thanks to our execution ability and the strength of our balance sheet. Our Solutions are all about working alongside our clients to help them grow their underlying business. Joint risk sharing ensures an alignment of interest and makes us an even stronger partner.
Steady growth in elipsLife’s mature markets allowed the business to expand into new markets, including the US. Meanwhile, iptiQ expanded into property & casualty personal lines in Europe. By the end of 2019, iptiQ had onboarded 29 partners, providing protection to more than 377 000 customers globally, and leading to an estimated valuation of USD 1–1.5 billion.
Premiums Gross premiums written in the open book businesses increased by 22% during 2019 when measured at constant exchange rates. Net premiums earned and fee income increased to USD 2.1 billion during 2019 from USD 1.6 billion in the prior year, driven by growth in the open book life and health insurance businesses, combined with the net impact of intragroup retrocessions and foreign exchange movements.
Fee income from policyholders 434 451 4 Net investment income – non-participating business 1 256 1 193 –5 Net realised investment gains/losses – non-participating
Investments 7, 8, 9 Fixed income securities: Available-for-sale (including 11 502 in 2018 and 14 175 in 2019 subject to securities lending and repurchase agreements) (amortised cost: 2018: 89 673; 2019: 74 780) 92 538 79 163 Trading (including 2 599 in 2018 and 1 911 in 2019 subject to securities lending and repurchase agreements) 3 414 2 410
40 Swiss Re | Financial Review 2019 a) Business segments – income statement For the year ended 31 December 2018 Property & Casualty Reinsurance
Net income/loss after attribution of non-controlling interests 370 802 –405 23 –328 0 462
Premiums earned before retrocession to external parties 19 842 14 055 4 482 2 101 40 480
Gross premiums written, thereof: Direct 14 3 869 2 230 6 113 Reinsurance 21 189 13 794 1 037 95 36 115 Intra-group transactions (assumed) 373 644 68 506 –1 591 0
A summary of prior-year net claims and claim adjustment expenses development by lines of business for the years ended 31 December is shown below1: Line of business: Property –340 367 Casualty 428 1 425 Specialty –295 105 Life and health 249 334 1 Adverse development is shown as positive numbers, and represents a charge to the income statement. Favourable development is shown as negative, and represents a credit to the income statement
Offsetting of derivatives, financial assets and financial liabilities Offsetting of derivatives, financial assets and financial liabilities as of 31 December was as follows: Gross amounts of Net amounts of financial Related financial 2018 recognised Amounts set-off assets presented instruments not set-off USD millions financial assets in the balance sheet in the balance sheet in the balance sheet Net amount
Derivative financial instruments – liabilities –1 505 923 –582 21 –561 Repurchase agreements –3 334 2 753 –581 581 0 Securities lending –940 580 –360 339 –21
Significant Significant other unobservable 2019 observable inputs inputs USD millions (level 2) (level 3) Total
Maturity Instrument Issued in Currency Nominal in millions Interest rate First call in Book value in USD millions 2026 Tier 3 subordinated notes1 2019 GBP 250 4.02% 333 2029 Tier 2 resettable callable subordinated notes1 2019 GBP 250 5.77% 2024 331 2029 Tier 2 subordinated notes1 2019 GBP 500 5.87% 656 2042 Subordinated fixed-to-floating rate loan note 2012 EUR 500 6.63% 2022 555 2044 Subordinated fixed rate resettable callable loan note 2014 USD 500 4.50% 2024 498 2049 Subordinated fixed rate reset step-up callable loan note 2019 USD 1 000 5.00% 2029 991 2050 Subordinated fixed rate reset step-up callable loan note 2019 EUR 750 2.53% 2030 838 2057 Subordinated private placement (amortising, limited recourse) 2007 GBP 1 448 6.04% 1 918 Perpetual subordinated fixed spread callable note 2019 USD 1 000 4.25% 2024 991 Perpetual subordinated fixed-to-floating rate callable loan note 2015 EUR 750 2.60% 2025 800
In June 2019, ReAssure Group plc issued callable Tier 2 subordinated notes due 2029, which are callable in 2024. The notes have an aggregate face value of GBP 250 million, with a fixed coupon of 5.766% per annum until the first optional redemption date (13 June 2024). The notes were initially issued to Swiss Re Finance Jersey Ltd and, in July 2019, a portion was sold to a third party outside the Swiss Re Group. In August 2019, the remaining portion was sold to the same third party.
As announced on 31 October 2019, the Group Board of Directors decided not to launch the second tranche of the public share buyback programme approved by the 2019 Annual General Meeting.
Consolidated VIEs The following table shows the total assets and liabilities in the Group’s balance sheet related to VIEs of which the Group is the primary beneficiary as of 31 December: Fixed income securities available-for-sale 3 444 3 423 Investment real estate 166 143 Short-term investments 79 260 Investments for unit-linked and with-profit business 654 Cash and cash equivalents 20 49 Accrued investment income 30 27 Premiums and other receivables 26 31 Funds held by ceding companies 1 Deferred acquisition costs 3 3 Deferred tax assets 212 182 Other assets 16 15 Reclassified to assets held for sale –812
• changes in accounting standards, practices or policies; • strengthening or weakening of foreign currencies;
Our annual report Our annual report consists of the Business Report and the Financial Report: Business Report This publication explains the progress we made against our strategy and describes the markets in which we operate, our culture, as well as our approach to sustainability. We also share stories of how we tackle risk and make the world more resilient.
The Swiss Re Group is one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient.
Long-term capital allocation in a volatile context – our task For the time being, however, the following applies to the overall context in which the company operates: without a reliable political framework, the range of possible scenarios will grow further, and careful handling of our capital will become even more essential. Our core task is now more demanding than it was a decade or two ago: specifically, to profitably allocate the capital that you provide to us to the various risk portfolios and to profitably reinvest or return to the shareholders the capital we receive from the cash flow from our insurance activities.
Vigilance in the US casualty business The big disappointment of 2019 was the casualty business in the US. Yet again, you might say, since this is a sector that regularly causes headaches for reinsurers. However, it was a very profitable area in the years prior to 2015, thanks in no small part to the reform of liability legislation during George W. Bush’s presidency. There had also not been any significant inflation in the US for years, something that usually has a negative impact on this business. And so we gradually expanded this business from 2015 onwards – not massively, but consistently. That was a mistake.
Our strategic response On the asset side, portfolio diversification and a highly disciplined investment approach are critical in the persistent low interest rate environment. In recent years, we also increased our allocation to higher return-generating strategies, including high-quality corporate credit and real estate, enabling a continued strong return on investment and a stable running yield.
Estimated decline in global growth in 2019 (Source: Swiss Re Institute)
The strategic importance of the Asia-Pacific region is shaping and shifting the global balance of economic influence and power. Economic prosperity and the resulting growth of the middle class in many Asian countries is a key driver of greater insurance penetration in the region. According to the OECD, by 2030, China and India are expected to become the countries with the largest middle class globally by number of citizens.
Support risk prevention by encouraging policy holders to take appropriate steps to mitigate risk.
Our role in society * This figure is derived from a return of USD 1.7 billion attributed to the ordinary dividend and a return of USD 0.9 billion attributed to share buybacks.
Our strong brand helps us to broaden and deepen our client base
We currently implement our strategy of diversifying access to risk pools by: Our strategy
Dr. Chutatong Charumilind Secretary General in charge of the Insurance Premium Rating Bureau, Thai General Insurance Association
“In such a mega project like the Grand Paris one, with high values, long construction times and high risk, we have to work very closely with clients to build customised solutions that optimise the cost of risk and provide risk management solutions,” says Swiss Re’s Montserrat Alfonso Tort, who has been working on the project with clients such as SMA Group, since 2016. Swiss Re, with its global experience and technical expertise, is able to provide a palette of services throughout the project’s life cycle that go beyond standard solutions, helping this client handle the inherent complexity, scale and long duration.
In our asset management, we systematically integrate environmental, social and governance (ESG) criteria across our whole investment portfolio. This makes economic sense and helps the real economy to shift to a more sustainable path. As a co-founder of the UN-convened Net-Zero Asset Owner Alliance, we also joined the Science Based Targets Initiative and will develop and apply science-based emissions reduction targets. After reaching our goal of holding green bonds of at least USD 1.5 billion, we expanded our commitment to include social and sustainability bonds and set ourselves a new goal of USD 4 billion to be reached by the end of 2024.
Our Sustainability Report continues to serve as the official disclosure document for two voluntary commitments we have made to the United Nations: the UN Global Compact and the UNEP FI Principles for Sustainable Insurance. You can view the fully-linked reference tables in the online version of the report. We will continue to honour both commitments as part of our Group Sustainability Strategy and report on our activities to meet their principles.
Life Capital Life Capital supports and incubates entities in the B2B2C primary business, B2B corporate business as well as the closed book space.* As a key part of Swiss Re’s strategic growth plan, Life Capital provides alternative access to new Life & Health and Property & Casualty risk pools. It creates simple and transparent digital propositions that make insurance products simpler and more accessible, helping boost the business of our partners.
In our core re/insurance business there are units such as our Public Sector Solutions global function, the Weather, Agro & MGA team in our Corporate Solutions Business Unit, the P&C Structured Solutions team in our Reinsurance Business Unit and many more that identify underinsured markets and risks, and seek to expand re/insurance protection through commercially viable solutions.
In our risk management, meanwhile, we have a process and the capabilities to identify risks we feel we should not re/insure, be it for ethical reasons, because they might increase loss potential, or both. We conduct this analysis through our Sustainable Business Risk Framework and other tailor-made risk management tools.
We also maintain a formal process to identify emerging risks called SONAR (systematic observation of notions associated with risk). This enables us to spot, at an early stage, newly developing or changing risks that may have a significant impact on our business, including risks related to sustainability issues.
• Employees • Political and legal entities: multilateral organisations (UN), governments, regulators, standard-setting boards
Building societal resilience Technological and economic development, population growth, ageing populations and other societal trends are putting people and assets in jeopardy. With our re/insurance solutions and investments we help reduce societal vulnerabilities. Our key objectives are: • We provide affordable health and longevity solutions to our customers to ensure healthy lives and to promote wellbeing across all age groups.
• The Board’s Finance and Risk Committee defines the Group Risk Policy, reviews risk capacity limits, monitors adherence to risk tolerance, and reviews all top risk issues and exposures, including those with a specific sustainability dimension.
• The Group Chief Investment Officer (Group CIO) has overall responsibility for Group Asset Management and its investment result, and with that also for the consistent integration of environmental, social and governance (ESG) aspects along the investment process. The Group CIO is responsible for investment decisions within the Strategic Asset Allocation implementation, including those related to responsible investing and is informed of ESG updates through various channels including the Asset Management Investment Committee.
Stakeholder dialogue Through regular dialogue with our clients, investors and other stakeholders, we help develop effective responses to sustainability and other key issues, by raising awareness of both the risks and opportunities arising from them.
• Insurance-linked securities (ILS) or catastrophe bonds: We are a leading developer of these products, which enable cedents to transfer large risks to the capital markets.
The link between climate change and natural catastrophes continues to be of high relevance for Swiss Re. In our Group Sustainability Strategy we have devoted one of its 2030 Sustainability Ambitions to this topic: Mitigating climate risk and adancing the energy transition.
In addition to providing re/insurance covers, we offer our clients strategic expertise and integral risk assessments of natural disasters and climate adaptation. These include free client access to Swiss Re’s CatNet® tool (swissre.com/reinsurance/property-andcasualty /solutions/property-specialtysolutions /catnet.html), which includes our recently launched Global Storm Surge Zones service, and our expertise publications (for examples, see pages 50–53).
Swiss Re’s Public Sector Solutions team has played a key role in advising the Indonesian government on the risk financing initiative and for developing a holistic approach. While the initial coverage includes the assets of the Ministry of Finance, assets owned by ten further ministries and agencies will be reviewed in 2020. In 2021, the number of included ministries can increase to 20 and, in 2022, to 40, with the ultimate goal being to cover all ministries and institutions for 2023. As a leader in developing solutions at the sovereign and sub-sovereign level, we are honoured to help boost Indonesia’s resilience.
Construction is scheduled to be completed by 2022. Swiss Re Corporate Solutions insures this pioneering project with the largest share, both in the construction and operational phases.
Sustainability, cyber, political and emerging risks are particularly relevant in this respect. We have developed instruments and know-how that help us identify and assess all of them. This allows us to determine those risks we think we should avoid – because of their potential to increase losses, for ethical reasons or both.
Proceed Proceed with conditions Abstain 238 Sustainable Business Risk transactions referred to our team of sustainability experts (247 in 2018)
In 2017, we reached a key milestone on this journey. As one of the first re/insurance companies, we integrated ESG benchmarks into our investment portfolio, which was a significant step forward from considering ESG as an “add-on” approach only. Two years later, we are even more convinced that taking ESG criteria into account has a positive impact on the performance of our investment portfolio in the long term. Reflecting this, we further refined our Responsible Investing strategy and made new commitments in 2019. Most notably, we acted as a founding partner of the UN-convened Net-Zero Asset Owner Alliance (www.unepfi.org/net-zeroalliance /), committing to transitioning Swiss Re’s investment portfolio to net-zero greenhouse gas (GHG) emissions by 2050.
In recognition of our stringent Responsible Investing strategy, in 2019 we were selected to the PRI Leaders’ Group on asset owners’ selection, appointment and monitoring of external managers in listed equity and/or private equity.
Inclusion Thematic investments are an ideal way to tackle specific sustainability topics. We mainly target investments that contribute to a low-carbon economy and facilitate the mitigation of climate change. An effective way to do this is by investing in infrastructure renewables and green bonds. For the latter we use the Green Bond Principles (GBP) issued by the International Capital Market Association (ICMA, www.icmagroup.org/) as guiding principles for our investments. We were holding USD 1.8 billion in green bonds as of year-end 2019.
You can find more information about Swiss Re Institute at: www.swissre.com/institute/
In 2019, our stakeholder dialogue on this 2030 Sustainability Ambition included the following highlights: • As part of our Digital Ecosystems Series (May 2019), we published the research report titled “Mobility ecosystems: striving towards a seamless interface for customers”. The study found that urbanisation, changing demographics and greater environmental awareness are putting pressure on existing mobility infrastructure. It also found that rapid urbanisation means that societies will increasingly need sustainable and resilient mobility solutions, including a more dynamic use of existing systems, as well as newer tech-enabled mobility platforms.
The acknowledgement that ESG considerations are not just a “nice-tohave ” was reiterated numerous times during the event, with emphasis put on how it makes economic sense to integrate ESG factors into investment decisions. At the same time, there was agreement that all stakeholders need to continue taking action if society as a whole is to achieve the climate goals set in the Paris Agreement.
• In the US, we have maintained regular dialogue with the National Association of Insurance Commissioners (NAIC), principally on climate change and natural catastrophes.
Take a look at our website for further information on our collaborative projects: www.swissre.com/institute/partnerships. html
Over the years, we have set ourselves ambitious targets to address our own CO2 footprint. In 2003, we were one of the first large companies worldwide to commit to becoming greenhouse neutral. In 2014, we pledged to cover all our energy consumption from renewable sources by 2020 and, to motivate other companies to do the same, co-founded the RE100 initiative. To see where we stand on this journey at the end of 2019, see page 59.
With these internal measures we have played a pioneering role in the fight against climate change. Today, however, climate scientists clearly state that efforts need to be reinforced: to keep global warming well below 2°C, the world needs to reach net-zero emissions by 2050 (see illustration above). Put simply, net-zero emissions means that for every tonne of CO2 that cannot be reduced yet, another tonne needs to be removed from the atmosphere and stored permanently through so-called carbon removal technologies. Scientists further predict that it will take billions of tonnes of negative emissions to keep warming below 2°C – the longer emission reduction efforts are deferred, the more.
To achieve net-zero in our operations, we need to do two things: Firstly, we will double down on our efforts to reduce emissions. As approximately 70% of our CO2 footprint stems from business travel, we will focus on flight emissions, starting with a reduction target of at least –15% in 2020. Afterwards, further reductions will be incentivised by ramping up our existing internal carbon price to a stringent carbon steering levy.
Despite these measures, the amount of kilometres travelled per employee and the associated emissions increased for a number of years, mainly driven by our continued expansion in high growth markets. After falling by 6.0% in 2018, the average total distance travelled by each of our employees remained roughly the same in 2019, at 14 228 km/FTE.
The procurement of all goods and services from external vendors is conducted in accordance with our Group Sourcing Standard, which also incorporates these headings from the UN Global Compact. When selecting new products and suppliers, we examine whether they comply with these requirements as part of the overall evaluation process. We take a fresh look at existing strategic suppliers in our periodic contract reviews and visit individual suppliers to inspect them onsite. Internally, we hold regular awareness trainings with our sourcing staff.
Following the encouraging results from the Performance Management Pilots conducted over two years with over 2 000 employees, we are now moving ahead with Continuous Performance Management, which will remove year-end ratings and focus on the qualitative aspects of performance management. We are committed to making Swiss Re a more commercial, nimble and agile company by enabling our employees to adapt quickly and smartly to changing business needs.
For most employees, total compensation comprises base salary and the Annual Performance Incentive (API), which is linked to both individual and company performance.
As with our annual surveys in previous years, we experienced high response rates for our pulses: 80% in May and 69% in November. Our Group Employee Engagement score established in the May pulse was 64%, 2 percentage points lower than in 2018 and slightly below Aon’s GlobalFinance & Insurance industry average. The Engagement score is calculated based on how employees speak about their organisation, on their desire to work for it and their motivation to contribute to business success. We continue to compare our results with external benchmarks.
Many of our locations have active employee groups. These employee representatives play an important part in the company’s success by contributing valuable perspectives and by helping us identify employmentrelated challenges. We support and appreciate the cooperation with these groups.
Employee health data: Sick leave data for Switzerland, Slovakia and India, regular staff*
We appreciate that today’s fast-moving and demanding work environment can pose challenges to the health of our employees and we do our best to provide them with support. In our efforts, we consider a healthy mind to be as important as a healthy body. We offer free, locally available Employee Assistance Programmes, through which our employees can get confidential, impartial and professional assistance on issues of a personal or work-related nature. To help our people stay physically fit, we provide onsite fitness centres and classes, for instance in Switzerland and Bangalore.
In Switzerland, for instance, we have extended our parental leave regulations and now offer our fathers and secondary carers the possibility to extend their leave by up to six weeks to a total of eight weeks, made possible by a 50/50 cost-sharing arrangement between employees and Swiss Re.
Whistleblowing Swiss Re is strongly committed to maintaining a culture in which employees feel free to voice their concerns and report suspected misconduct. Accordingly, Swiss Re explicitly prohibits any retaliatory action against employees who report suspicions of misconduct in good faith and has implemented processes to support good faith reporting.
CDP CDP is a not-for-profit charity that runs a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. www.cdp.net