We have to be strategically prepared for this. We believe that digital disruption will have a less immediate impact on reinsurance and major risk business than on direct insurance business. And we believe that having an agile personnel and organisational infrastructure will be advantageous for purposes of flexibly adapting traditional business models. Nevertheless, we are not naïve: we certainly cannot allow ourselves to become complacent in such a radical phase of change – on the contrary, we want to play an active role in shaping it. Waiting anxiously and doing nothing is never a useful strategy. Swiss Re is therefore examining various strategic options that will enable us to respond rapidly to the digital transformation and fully capitalise on its future potential.
Karen Gavan has over 35 years’ experience in various senior-level finance and management positions in insurance companies, both in life insurance and property and casualty business. Eileen Rominger is a recognised investment professional with extensive investment management experience. Larry Zimpleman boasts a successful 44-year career with the Principal Financial Group, an investment management firm that provides insurance solutions and asset management and pension products to private individuals and institutional clients. In the course of their diverse careers, all three have accumulated extensive international experience and sound insurance expertise, as well as wide-ranging skills in the field of new digital insurance solutions and offerings.
At the same time, with digital solutions we’re improving our international business capabilities to better support our commercial insurance clients around the world. We work with our clients – from retail operators to real estate companies and from schools to hotels – to provide a better understanding of the current and future risks they face and develop innovative solutions that meet their specific needs and risk exposure. Insured businesses are more resilient businesses because in the event of a disaster, we help them get back to work and serving their own customers quicker.
For Swiss Re, the protection gap refers to underinsured risk pools around the globe that could potentially lead to high economic losses. Population growth, increasing human concentration in natural disasterprone areas, or lack of awareness or perception of risk are some of the factors that can contribute to a widening protection gap worldwide. Swiss Re leverages over 150 years of re/insurance expertise to help society better manage its risks. Combining knowledge and technology advancements, we work with our clients and the relevant governmental institutions to develop innovative solutions that broaden the scope of our service coverage to help narrow the protection gap and contribute to making the world more resilient.
Large catastrophic losses 2017 was one of the costliest natural catastrophe years for the re/insurance industry.
Large and tailored transactions Large and tailored transactions in Reinsurance provide an attractive growth opportunity. They reinforce our differentiation through tailored offerings, leveraging our strong risk knowledge base.
Access to a team of experts Swiss Re's clinical team is made up of health professionals in a wide range of fields, including vocational rehabilitation, physiotherapy, psychology, and occupational therapy. These health professionals consult with our clients to design and implement holistic and individualised claims management, and have worked with our clients to develop return to work services for specific health conditions. These experts work with insurers to advise on the benefits of therapeutic intervention in the recovery process, and collaborate to build and promote a proactive claims management culture, identify trends, diagnoses and key claims drivers.
The Swiss Re Institute builds on the established strengths of Swiss Re, such as our long-running flagship sigma publication, our executive training programmes, our risk research and our well-known conference series with new complementary products.
Embracing individual preference At Swiss Re, we enable everyone to reach their full potential, as individuals and as teams. We align our working environments and methods with evolving social trends and challenging market conditions.
Business Units at a glance 2 Message from the Chairman 4 Statement from the Group CEO 8 How re/insurance works 14
49% P&C Reinsurance 36% L&H Reinsurance 11% Corporate Solutions 4% Life Capital
Headline inflation continued to increase in the major markets, driven by the price of oil, which was higher on average in 2017 compared to 2016. However, underlying inflation (excluding energy prices) as well as wage increases remained moderate despite broad-based declines in unemployment. In the US, wage gains decelerated to about 2.5% year on year in 2017, down from 2.9% in December 2016. Similarly, wage growth in the UK slowed in 2017 compared to 2016, despite record low unemployment.
An example of our commitment to financial market resilience is the research partnership between the recently formed Swiss Re Institute (SRI) and the London School of Economics (LSE) focusing on monetary policy and long-term investment. The partnership, which continued in 2017, examines two questions. The first concerns the changing structure of central banks’ balance sheets and potential implications for the functioning of markets.
In the US, losses from hurricanes Harvey, Irma and Maria are to add a significant natural catastrophe loss burden for 2017. We expect a full-year 2017 combined ratio of around 109% for the US property & casualty (P&C) industry.
Another area of growth for reinsurers has been longevity risk transfer. The availability of longevity reinsurance has become key to the pricing of annuity transactions, as insurers offering those transactions to pension funds typically look to simultaneously access reinsurance capacity to hedge at least part of the associated longevity risk inherent in these lines. Such ˝back-to-back˝
Our near-term priorities focus on achieving growth in targeted areas and sustaining the risk knowledge that underpins our capital allocation overall.
Fee income from policyholders 540 586 9 Net investment income – non-participating business 3 661 3 708 1 Net realised investment gains/losses – non-participating business 1 484 1 727 16 Net investment result – unit-linked and with-profit business 5 382 3 315 –38
Expenses Claims and claim adjustment expenses –12 564 –16 730 33 Life and health benefits –10 859 –11 083 2 Return credited to policyholders –5 099 –3 298 –35
The Group’s claims ratio for property and casualty increased from 61.2% in 2016 to 82.3% in 2017.
Lines of business The Property combined ratio increased to 119.9% in 2017, compared to 86.6% in 2016, primarily due to the large natural catastrophe loss burden in 2017.
Net realised gains were USD 590 million for 2017, compared to USD 475 million for the prior year, with the increase stemming from additional gains from sales of equity securities, partially offset by a reduction in gains from sales of fixed income securities.
For Casualty, rates increased in segments where price levels appeared inadequate due to claims emergence (eg. UK Motor, US Motor and Liability). We also saw commissions reducing to address non performance.
Premiums Net premiums earned and fee income in 2017 increased by 3.9% to USD 12.0 billion compared to USD 11.5 billion for the prior year. Gross premiums written increased by 4.0% to USD 13.3 billion compared to USD 12.8 billion for the prior year. The increase in premiums was mainly due to new business wins and growth in the US and Asia.
Expenses Life and health benefits –8 963 –9 211 3 Return credited to policyholders –39 –119 —
“2017 was a difficult year for Corporate Solutions, however we are well positioned to benefit from a gradual improving market following the sizable natural catastrophe losses in 2017. Also, we continue to build our capabilities for future growth.”
Net premiums written 3662 3 600 –2 Change in unearned premiums –159 51 —
Swiss Re will ask the AGM in April 2019 permission to cancel the repurchased shares by way of share capital reduction.
Information for investors More information is available on Swiss Re’s website: www.swissre.com/investors of which Treasury shares and shares reserved for corporate purposes 28 511 298 28 507 491 32 967 2262 34 093 8343 34 866 5164
EVM profit 1 399 −9 Cost of debt −461 −626 Release of current year capital costs 2 778 2 792 Additional taxes 515 −290 Total contribution to ENW 4 231 1 867
Other −34 −57 −137 −5 −7 −240 Gross underwriting result – new business 2 559 2 646 909 59 −7 6 166
Total liabilities and economic net worth 79 073 235 221 16 710 90 253 7 945 −30 760 398 442
Superior capitalisation despite severe events Swiss Re’s policy of ensuring superior capitalisation at all times has meant that even in the face of large insurance claims from the 2017 natural catastrophe events, we maintain a very strong capital position and high financial flexibility. Our financial strength enables us to respond to potential market developments in the aftermath of such severe events and to stay committed to creating long-term shareholder value.
7% Cash short-term investments and reverse repos 53% Government bonds AAA rated & US
The framework comprises the following major elements: ̤ Risk governance documentation, incl. Group Risk Policy ̤ Key risk management principles ̤ Fundamental roles for delegated risk-taking ̤ Risk culture ̤ Organisation of risk management, including responsibilities at Board and executive level
Risk tolerance describes the extent to which the Group Board has authorised executive management to assume risk. It represents the amount of risk that Swiss Re is willing to accept within the constraints imposed by its capital and liquidity resources, its strategy, and the regulatory and rating agency environment within which it operates.
Diversification effect –12.9 –13.0 Swiss Re Group 19.5 19.7 1 1 Credit comprises credit default and credit migration risk from both asset management and underwriting. Credit spread risk falls under financial market risk.
Some of these risks are reflected indirectly in the risk model, as their realisations may be contained in the historical data used to calibrate some of the risk factors. In addition, output from the model is used in measuring liquidity risk under stressed conditions. As separate risk categories, these risks are an integral part of Swiss Re’s risk landscape. They are monitored and managed within the Risk Management organisation, and included in risk reports to executive management and the Board at Group and legal entity level.
Client Markets, Underwriting and Risk Management. For transactions of defined types and within defined limits, this may be applied through the approval of underwriting or pricing guidelines. For other transactions, the signatures must be secured through an individual review.
Life and health risk Change from 2016 99% tail VaR: +4%
INSURANCE RISK STRESS TESTS: SINGLE EVENT LOSSES WITH A 200-YEAR RETURN PERIOD1
̤ John Dacey, Group Chief Strategy Officer, will become Group Chief Financial Officer as of 1 April 2018, succeeding David Cole who has decided to step down as Group Chief Financial Officer. With that change, the two roles of Group Chief Financial Officer and Group Chief Strategy Officer will be merged.
̤ Cyber risk is also a regular topic on the agenda of the Board meetings and forms part of the onboarding programme for new Board members.
The following table provides a summary of the disclosure notifications of major shareholders holding more than 3% of the voting rights: In addition, Swiss Re Ltd and Group companies held, as of 31 December 2017, directly and indirectly, 34 866 516 shares, which includes 6 347 500 shares repurchased under the public share buy-back programme Swiss Re Ltd launched on 3 November 2017. This represents 9.98% of voting rights and share capital. The public share buy-back programme was completed on 16 February 2018. Neither Swiss Re Ltd nor the Group companies can exercise the voting rights of these shares. All notifications received in 2017 are published at www.swissre.com/investors/ shares/disclosure_of_shareholdings/
of CHF 0.10. Increases by underwriting as well as partial increases are permitted. The Board of Directors determines the date of issue, the issue price, the type of contribution and any possible acquisition of assets, the date of dividend entitlement as well as the expiry or allocation of non-exercised subscription rights.
The reduction of the ordinary share capital could only take place after the required three notices to creditors had been published in the Swiss Gazette of Commerce (Schweizerisches Handelsamtsblatt) as stipulated in Art. 733 of the Swiss Code of Obligations. The reduction of the ordinary share capital approved by the Annual General Meeting on 21 April 2017 was published in the Swiss Gazette of Commerce on 25 July 2017.
The Annual General Meeting 2015 also approved that the limitation included in the provisions of the Articles of Association to issue shares from conditional capital, where the existing shareholders’ advance subscription rights on the Equity-Linked Financing Instruments are excluded, be extended to 21 April 2017.
Felix Horber, attorney-at-law, has been the Company Secretary since 2007. He holds a PhD in Law, an Executive Master in European and International Business Law and is a Certified Director for Board Effectiveness.
Election, succession planning, qualifications and term of office Election procedure Members of the Board of Directors and the Chairman of the Board of Directors are elected individually by the General Meeting of shareholders for a term of office until completion of the next General Meeting of shareholders.
Members ̤ C. Robert Henrikson, Chair ̤ Raymond K.F. Ch’ien ̤ Renato Fassbind ̤ Joerg Reinhardt (since AGM 2017) ̤ Carlos E. Represas (until AGM 2017)
̤ annually reviews with the Group EC the Swiss Re Group’s overall human capital situation, strength of management and issues like diversity and inclusion, performance process and quality of succession planning.
Jean-Jacques Henchoz joined Swiss Re in 1998 as facultative property underwriter in Division Europe, and in 1999 he moved to the Swiss Re New Markets Division as finite risk underwriter. From 2000 he served as Head Financial Solutions until becoming Head of Strategy for Property & Casualty in 2003. From 2005 to 2010, he was Chief Executive Officer of Swiss Re Canada. Jean-Jacques Henchoz assumed leadership of the Europe Division in March 2011. He was appointed Chief Executive Officer Reinsurance EMEA, Regional President EMEA and member of the Group Executive Committee in January 2012.
Moses Ojeisekhoba Chief Executive Officer Reinsurance Born: 1966 Nationality: Nigerian and British
Following the acquisition of GE Insurance Solutions by Swiss Re in 2006, Jayne Plunkett joined Swiss Re as Head of the Kansas City Hub for Property & Casualty. From 2008 to 2012 she worked in Asia as Head of Casualty Underwriting for the region. In 2013 she assumed the global position as Head Casualty Reinsurance, also managing the unit dealing with large and complex transactions for P&C Reinsurance. As of July 2016, Jayne Plunkett was appointed as Chief Executive Officer Reinsurance Asia, Regional President Asia and a member of the Group Executive Committee.
Jayne Plunkett is a fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries. Additionally, she was named a Young Global Leader of the World Economic Forum in 2010.
Professional experience Edouard Schmid joined Swiss Re in 1991 as a risk analyst, developing catastrophe models and supporting property catastrophe underwriting on a global basis. Since 1996, he was a team leader in the Cat Perils unit, until he became Head Cat Perils & Retrocession in 2002. From 2003 until 2008 he was based in Hong Kong as Chief Underwriter Property & Specialty Asia. He returned to Zurich in 2008 and served as Head Property & Casualty Risk and Actuarial Management, and, concurrently, as Chief Risk Officer Corporate Solutions from 2011. In May 2012 he became Head Property & Specialty Reinsurance.
Group Chief Risk Officer The Group CRO is responsible for providing the Board of Directors and Group EC with independent assurance that all of Swiss Re’s risks are being appropriately modelled, governed, managed and that adequate controls are in place. As part of executing these responsibilities, the Group CRO is charged with establishing the Group’s Risk Management Framework for all risk categories including but not limited to financial, insurance and operational risk (the latter comprising reporting risks, legal and compliance risks and other operational risks).
The Business Unit Chief Executive Officers The BU CEOs are responsible for the management and performance of the respective Business Unit Top-Level company as well as the respective Business Unit. The BU CEOs set the business and corporate agenda of the respective Business Unit, ensure high quality and performance-oriented and timely decision-making. They oversee the implementation of the decisions made and ensure the Business Unit Executive Committees fulfil their responsibilities.
The duties of the Independent Proxy are determined by applicable laws, rules and regulations. The General Meeting of shareholders may remove the Independent Proxy with effect as per the end of the General Meeting of shareholders. If the company does not have an Independent Proxy, the Board of Directors shall appoint the Independent Proxy for the next General Meeting of shareholders.
Audit fees The Audit Committee annually reviews the audit fees as well as any fees paid to the external auditor for non-audit services, based on recommendations by the Group CFO.
Information policy As a globally operating company, we strive to inform all our stakeholders in a transparent, open and consistent way – going well beyond legal information requirements.
Infrastructure renewables For our infrastructure loan mandates, we work with best-in-class managers to gain access to and invest in renewable energy projects that reflect our risk appetite, provide attractive long-term returns and help build a more sustainable energy supply for the future.
Real estate In the real estate area, we apply the following sustainability criteria: energy source in relation to the market value of properties and MINERGIE® certifications. MINERGIE® is a Swiss sustainability brand for new and refurbished buildings. By the end of 2017, the combined value of our MINERGIE®-certified buildings reached USD 0.4 billion, or 22% of our Swiss portfolio of direct real estate investments. The total energy consumption surface in accordance with the MINERGIE® standard was 82 497 m2 at the end of 2017. In addition, more than 59 000 m2 was sold to third parties.
4 Kunreuther, Howard; Michel-Kerjan, Erwann; and Ranger, Nicola, “Insuring Future Climate Catastrophes” (2012). Published Articles & Papers. Paper 171.
General sustainability risks in our re/insurance business We consistently use our Sustainability Risk Framework to identify and address potential sustainability risks in all our underwriting and investment transactions. This framework continuously evolves to reflect scientific knowledge and internal standards. With respect to climate change, this framework prevents us from offering any re/insurance cover to off-shore drilling activities in the Arctic and use predefined quality criteria to screen transactions in the areas of oil sands, fracking and shale oil.
Change in % since 2013 1 Calculation based on a market-based approach taking into account the purchase of renewable energy instruments, with the exception of the UK where the government requires companies to report an average grid factor.
Green bonds Green bonds, whose proceeds are used to finance environmentally sustainable projects facilitating the transition towards a low carbon economy. In the near term, we have committed to build a portfolio of at least USD 1.5 billion and are well advanced in the investment process.
compensation framework with shareholders’ interests and with our long-term business and risk strategy; ̤ the effectiveness of the current performance measurement approach which assesses actual performance versus goals and then determines compensation outcomes; ̤ the competitiveness of compensation for the Board of Directors, Group Executive Committee (Group EC) and other executives; and
Consistent with last year and in line with our Articles of Association, shareholders will again be asked to approve the following amounts: ̤ maximum aggregate amount of
Payout range 0 to 2 × TAPI** 50% to 150% of deferred API
OVERVIEW OF COMPENSATION AND BENEFITS COMPONENTS FOR GROUP EC MEMBERS AND OTHER EMPLOYEES
Members have a five-year timeframe to achieve these targets. In addition, because Swiss Re believes that a meaningful stock ownership position is essential, restrictions on the immediate cash portion of API delivered will apply if these levels are not met within the specified timeframe.
Swiss Re’s TSR performance is assessed relative to the TSR of the pre-defined peer group. This peer group consists of companies that are similar in scale, have a global footprint or a similar business mix as Swiss Re. The peer group which is set at the beginning of the plan period has been increased to 16 companies in total, and includes Allianz SE, American International Group Inc, Aviva PLC, AXA SA, Chubb Limited, Everest Re Group Ltd, Hannover Rueck SE, MetLife Inc, Muenchener Rueckversiche rungsGesellschaft AG, Prudential PLC, QBE Insurance Group Ltd, Reinsurance Group of America Inc, RenaissanceRe Holdings Ltd, SCOR SE, XL Group Ltd and Zurich Insurance Group Ltd.
Roles and time commitment The requirements for memberships of boards of directors of complex, international listed companies, in terms of qualifications and skills, are constantly increasing. Swiss Re Ltd’s Board of Directors has a special skill set including international, industry or sector specific experience. These skills ensure that Swiss Re Ltd has the relevant expertise in place required for effective supervision. The fees for the members of the Board of Directors reflect different responsibilities and committee memberships. The individual levels of pay therefore vary.
Compensation Committee activities The Compensation Committee operates as the Group’s global compensation committee and oversees the compensation system applied at all entities of the Swiss Re Group with its decisions and guidance.
̤ Review of the role and mandate of external advisors September and December 1 Within the maximum aggregate amount of compensation approved by the AGM and the additional amount available for changes in the Group EC after the AGM as per the Articles of Association respectively.
Annual Performance Incentive Both the Compensation Committee and the Board of Directors assessed in depth the 2017 performance of the Group. The financial performance was significantly lower than 2016 and heavily impacted by a series of large natural catastrophes. In years with relatively benign natural catastrophe environments, variable compensation payouts were positive but not excessive. Conversely, in adverse environments, the negative impact shall be substantive but also proportionate, given the need to carefully manage key talent and retention risk. This financial context, the strong qualitative performance and the value sharing measurement for shareholders have resulted in lower but still balanced variable compensation payouts.
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 2017 amounted to CHF 293 million (compared to CHF 304 million in 2016) whereof CHF 155 million will be payable in cash (compared to CHF 169 million in 2016) and CHF 138 million in shares (compared to CHF 135 million in 2016).
Aggregate compensation for Key Risk Takers The aggregate compensation of the individuals that held a key risk-taking position during the performance years 2016 and 2017 was as follows: Performance Year 2016 Performance Year 2017
Fixed compensation Base salaries 210 79 180 67 Pensions, social security and benefits 210 35 180 29
Annual Performance Incentive Cash Annual Performance Incentive 210 57 178 36
Compensation for former members of governing bodies During 2017, payments in the total amount of CHF 0.1 million were made to five former members of the Group EC. This amount is made up of company contributions payable by Swiss Re to governmental social security systems in line with applicable laws, benefits in the context of the outstanding mortgages and loans not at market rates, risk benefits and company commitments for tax related services.
Framework of the Articles of Association In accordance with Art. 22 of the Articles of Association, the Shareholders’ Meeting shall approve annually and with binding effect the proposals of the Board of Directors in relation to: a) the maximum aggregate amount of compensation of the Board of Directors for the next term of office; b) the maximum aggregate amount of fixed compensation and variable long-term compensation of the Group EC for the following
AGM 2017 voting results At the AGM on 21 April 2017, shareholders approved for the third time the maximum aggregate prospective compensation of the members of the Board of Directors (88.5% approval). Shareholders also approved for the Group EC (i) the maximum aggregate prospective fixed compensation and variable long-term compensation and (ii) the aggregate retrospective variable short-term compensation. The outcomes were 87.2% and 89.0% approval respectively. As in previous years, the 2016 Compensation Report was subject to a consultative vote and was approved by 80.6% of the shareholder votes.
Investment in real estate that the Group intends to hold for the production of income is carried at depreciated cost, net of any writedowns for impairment in value. Depreciation on buildings is recognised on a straight-line basis over the estimated useful life of the asset. Land is recognised at cost and not depreciated. Impairment in value is recognised if the sum of the estimated future undiscounted cash flows from the use of the real estate is lower than its carrying value. The impairment loss is measured as the amount by which the asset's carrying amount exceeds its fair value and is recognised in realised investment losses. Depreciation and other related charges or credits are included in net investment income. Investment in real estate held for sale is carried at the lower of cost or fair value, less estimated selling costs, and is not depreciated. Reductions in the carrying value of real estate held for sale are included in realised investment losses.
Property & Casualty includes the business lines property, casualty (including motor) and specialty. Life & Health includes the life and health lines of business.
Expenses Claims and claim adjustment expenses –13 172 –3 558 –16 730 Life and health benefits –9 211 –1 872 –11 083 Return credited to policyholders –119 –3 179 –3 298 Acquisition costs –4 253 –2 064 –554 –106 –6 977 Operating expenses –1 159 –754 –759 –514 –474 352 –3 308
Expenses Claims and claim adjustment expenses –3 745 –5 466 –1 090 –10 301 Acquisition costs –1 351 –2 468 –586 –4 405 Operating expenses –665 –385 –154 –1 204
The increase in incurred losses from accident year 2015 onwards is due to an increase in the volume of workers‘ compensation written on a proportional basis. The 2008 and prior accident years include the run-off of business written by entities acquired as part of the acquisition of General Electric Insurance Solutions during 2006. This business which generally had a longer payment pattern was not renewed.
Total net discounted outstanding liabilities excluding other short duration contract lines and before unallocated reinsurance recoverable 49 927 Other short duration contract lines 2 714 Unallocated reinsurance recoverable on unpaid claims –411
Discounting information The following disclosure covers the discounting impact for the disaggregation categories included in the claims development information. Discounting information for Life & Health Reinsurance long tail as of 31 December was as follows: Carrying amount of discounted claims 1 117 1 262 Aggregate amount of the discount –241 –291 Interest accretion1 27 28 Range of interest rates 3.1% –3.6% 2.9% –3.6%
Net realised investment gains/losses – non-participating business 1 484 1 727
Total realised gains/losses – unit-linked and with-profit business 3 819 484 2 110 211
Equity securities available-for-sale 2 897 561 –83 3 375 2017 Amortised cost Gross unrealised Gross unrealised
242 Swiss Re 2017 Financial Report 8 Fair value disclosures Fair value, as defined by the Fair Value Measurements and Disclosures Topic, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Interest rate contracts 14 1 044 1 058 Foreign exchange contracts 765 765 Equity contracts 4 433 341 778 Other contracts 5 120 125 Contracts backing unit-linked and with-profit business 12 63 75
Variable annuity and fair valued –500 –325 Discounted Cash Flow Risk margin 4% (n.a.) GMDB contracts Model Volatility 4%–42%
The significant unobservable inputs used in the fair value measurement of the Group’s variable annuity and fair valued guaranteed minimum death benefit (GMDB) contracts are: risk margin, volatility, lapse, mortality adjustment rate and withdrawal rate. A significant increase (decrease) in isolation in each of the following inputs: risk margin, volatility and withdrawal rate would result in a significantly higher (lower) fair value of the Group’s obligation. A significant increase (decrease) in isolation in a lapse rate for in-the-money contracts would result in a significantly lower (higher) fair value of the Group’s obligation, whereas for out-of-themoney contracts, an isolated increase (decrease) in a lapse assumption would increase (decrease) fair value of the Group’s obligation. Changes in the mortality adjustment rate impact the fair value of the Group’s obligation differently for living-benefit products, compared to death-benefit products. For the former, a significant increase (decrease) in the mortality adjustment rate (ie increase (decrease) in mortality, respectively) in isolation would result in a decrease (increase) in fair value of the Group’s liability. For the latter, a significant increase (decrease) in the mortality adjustment rate in isolation would result in an increase (decrease) in fair value of the Group’s liability.
Assets and liabilities measured at fair value pursuant to election of the fair value option Pursuant to the election of the fair value option for the items described, the balances as of 31 December were as follows: of which at fair value pursuant to the fair value option 442 446 Funds held by ceding companies 8 184 9 155 of which at fair value pursuant to the fair value option 225 206 Investments for unit-linked and with-profit business 32 178 35 166 of which at fair value pursuant to the fair value option 42
The Groupʼs debt as of 31 December was as follows: Senior financial debt 590 433 Senior operational debt 431 Subordinated financial debt 543
Total senior long-term debt as of 31 December 2016 4 157 1 Assumed in the acquisition of GE Insurance Solutions.
Gross deferred tax asset 6 430 5 314 Valuation allowance –505 –475 Unrecognised tax benefits offsetting benefits on loss carryforwards –23 –22
The estimated net loss and prior service credit for the defined benefit pension plans that will be amortised from accumulated other comprehensive income into net periodic benefit cost in 2018 are USD 73 million and USD 15 million, respectively. The estimated net gain/loss and prior service cost/credit for the other defined post-retirement benefits that will be amortised from accumulated other comprehensive income into net periodic benefit cost in 2018 are nil.
Effect on total of service and interest cost components 1 0 Effect on post-retirement benefit obligation 29 –25
Legal and General life policies Effective 1 January 2018, ReAssure entered into an agreement with Legal and General Assurance Society Limited to reinsure 1.1 million policies for GBP 650 million. It is intended that the reinsured polices will be transferred to ReAssure at a future date by way of a Part VII transfer under the Financial Services and Markets Act 2000, subject to regulatory approval.
Receivables from subsidiaries and affiliated companies 170 765 Other receivables and accrued income 2 5 Loans to subsidiaries and affiliated companies 2 260 3 179
Purchase of own shares1 987 559 995 183 Sale of own shares 2 –983 451 –1 027 501 Share buy-back programme (151st AGM 2015)3 6 214 370 – Share buy-back programme (152nd AGM 2016)4 5 542 500 5 077 780 Cancellation of shares bought back –10 634 370 –10 620 280 Share buy-back programme (153rd AGM 2017)5 – 6 347 500 Own shares as of 31 December 34 093 834 34 866 516 1 Purchased at average price CHF 89.91 (2016: CHF 88.73). 2 Sold at average price CHF 87.31 (2016: CHF 87.97). 3 Purchased at average price CHF 91.73.
Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (Article 728 CO and Article 11 AOA) and that there are no circumstances incompatible with our independence.
Securities used by insurance and reinsurance companies to transfer peak insurance risks, including natural catastrophes, to the capital markets. Catastrophe bonds help to spread peak exposures (see insurance-linked securities).
A couple of years ago, we reviewed which of these issues are the most relevant for our company and defined them as our Corporate Responsibility Topics. In the current edition, you can find a detailed overview of these topics, showing their links to the UN Sustainable Development Goals and summarising the actions we have taken to meet the internal goals we have set for them.
The financial figures in the table at the top provide information on the scale of the Swiss Re Group and income generated: total capitalisation broken down in terms of debt and equity, sales/revenues, operating costs and net income.
Swiss Re has a long-standing commitment to being a responsible company. A key element in our understanding of what this means is the desire to play our part in enabling sustainable progress, for the benefit of our clients and society at large. Taking this long-term view helps us to pursue our vision of making the world more resilient and is embedded in our value framework, which means ”doing business the Swiss Re way”.
Increase the effectiveness and efficiency of the Sensitive Business Risk (SBR) process by advancing automation of sustainability risk screening with our proprietary SBR Assessment Tool.
Made a big step forward by shifting our investment portfolio to ESG criteria and/or ESG benchmarks (pages 36–38).
Advance our understanding of the societal impact of insurance and develop metrics to measure our impact on stakeholders.
Started a reseach partnership on “Ethical and Legal Big Data Challenges in the Insurance Industry” with academic partners and contributed to a publication produced by the Chief Risk Officer Forum (page 46).
Stakeholder dialogue Through regular dialogue with our clients 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.
In view of the latent typhoon and other natural disaster risks, the Philippine government had already started to change its strategic approach a couple of years earlier in the wake of the 2009 typhoon season, which had caused losses of USD 4.4 billion (equivalent to 2.7% of GDP). It introduced new legislation marking a move from disaster response to disaster risk reduction and preparedness, and started to implement a three-tiered Disaster Risk Financing and Insurance strategy.
In 2017, we agreed with the city authorities of Lishui and our partner GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH, www.giz.de/en/) to provide support to an Economics of Climate Adaptation (ECA) study for the city. Swiss Re has many years of experience with these studies, which assess the present and future climaterelated risks faced by a location or region and identify cost-effective adaptation measures. The project was formally kicked off towards the end of 2017.
WEB CONTENT You can find general information about cat bonds – also called insurance-linked securities (ILS) – at www.swissre.com/investors/ils/
Longevity and health insurance remained two of our strategic priorities in the L&H business. The demand for longevity solutions is expected to grow further as demographics shift. We keep investing in research and development to improve our ability to predict mortality and longevity trends.
In 2017, we completed further longevity transactions but, for confidentiality reasons, are unable to publish any details on them. You can read more about our recent efforts to raise the topic’s public profile on page 43.
For companies this situation can create dilemmas. A specific business transaction may be economically beneficial and in compliance with all legal and regulatory requirements, yet may have significant environmental or social downsides. Swiss Re recognises that such dilemmas exist and develops effective responses through a well-defined approach and by taking decisions based on ethical principles.
If the potential human rights or environmental risks of a transaction are assessed as high but the responsible underwriter wants to pursue it, it is automatically transferred through the SBR referral tool to Swiss Re’s in-house team of sustainability experts. These specialists then conduct targeted research to decide whether the transaction at hand is acceptable on ethical grounds.
Company exclusions Our Sustainability Risk Framework policies specify certain criteria that may lead us to exclude a company from both our re/insurance transactions and our investments, to the extent that such an exclusion is permissible (eg by virtue of mandatory law or internal policies) and possible (eg if existing documentation relating to such re/insurance transactions and investments provide for it). These criteria include: involvement in prohibited war material; verifiable complicity in systemic, repeated and severe human rights violations; causing repeated, severe and unmitigated damage to the environment; unregulated proliferation of nuclear weapons; and unethical/cruel animal testing practices.
In today’s increasingly integrated world, political risks are key determinants of the business landscape. We need to be aware of any relevant political developments, actions and decisions that may affect our business. Within our risk management organisation, we have a team of specialists who look at a wide range of political risks at global, country and business transaction levels.
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 is a significant step forward from considering ESG as an “add-on” approach. We are convinced that taking ESG criteria into account has a positive impact on the performance of our investment portfolio in the long term.
The analysis shows that, currently, re/insurance contributes only 5% to the global ageing wallet of USD 11 trillion. In all these markets, state funding remains the key funding source, although there are significant national differences.
Storm surges are a key source of destruction unleashed by tropical cyclones, yet information on this risk has been limited so far. Our Global Storm Surge Zones tool closes this gap, helping our clients address the storm surge risks they may face.
Managing climate and natural disaster risk Losses from floods, storms, earthquakes, wildfires and other natural disasters can have a dramatic impact on the citizens and economies of entire countries. Insurance helps people, businesses and societies get back on their feet after disaster strikes.
Complementing the Group-wide ISO 14001 certification of our overarching environmental management system, we frequently seek additional regional or local recognition for particular environmental aspects. For example, since 2015 we have achieved ISO 50001 certification for the energy management system of our main locations in the European Union.
Despite these measures, the amount of kilometres travelled per employee and the associated emissions have been rising in recent years. A key driver is our continued expansion in high growth markets, which has brought an increase in teams distributed across different locations. In 2017, the total distance each of our employees travelled on average increased by 0.4%.
Before our emission figures are published, PricewaterhouseCoopers checks them to verify our calculations. Their complete assurance report for the whole Corporate Responsibility Report is included on pages 76–77.
̤ The innovative ceiling heats, cools and ventilates the building, thus creating a pleasant office climate with good acoustics.
̤ Empower and collaborate: We empower and enable our people to make decisions and drive performance, while at the same time ensuring that we maintain the appropriate risk culture. We encourage all employees to work together and collaborate across organisational and geographical boundaries for the wider and ultimate benefit of Swiss Re.
Promoting an inclusive culture We know that our employees’ lives and experiences are unique and we believe in championing that uniqueness.
A healthy mind is 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.
Shareholders’ participation rights Shares All shares issued by SRL are fully paid-in registered shares, each with a par value of CHF 0.10. Each share carries one vote. There are no categories of shares with a higher or limited voting power, privileged dividend entitlement or any other preferential rights, nor are there any other securities representing a part of SRL’s share capital. SRL cannot exercise the voting rights of treasury shares.