The FINANCIAL — With the current strategy delivering consistently strong results over the last three years, Swiss Re remains fully committed to its 2011-2015 financial targets.
At its annual Investors’ Day in London, Swiss Re provides a detailed update on the strategic initiatives which are the building blocks to its success. By focusing on underwriting excellence, combined with R&D and capital strength, Swiss Re seeks to continue to outperform in core areas while expanding where opportunities exists, for example in High Growth Markets, according to Swiss Re.
“Despite the competitive environment, our group strategy remains unchanged. It produced very strong results over the last three years, and we expect that it will continue to be successful for us in the future. At the core of our ambitions is reaching our financial targets for the 2011-2015 period. We are well on track. With clients expected to continue to rely on reinsurers for services and long-term support, we also believe that alternative capital cannot replace the traditional reinsurance model. It is our aim to maintain our leading track record in underwriting by keeping a strict focus on risk selection and portfolio management in property and casualty, while growing in life and health and in our Admin Re business,” said Michel M. Liès, Group Chief Executive Officer.
Capital management measures and Life & Health Reinsurance improvement programme progressively implemented
Swiss Re’s capital management priorities, published at the 2013 Investors’ Day a year ago, also remain unchanged. “We expect to have the new target capital structure fully implemented by 2016– as planned,” said David Cole, Group Chief Financial Officer.
In its Life & Health Reinsurance unit, Swiss Re made good progress on the management actions to improve the unit’s return on equity (ROE) as outlined last year. In addition, the new incoming business meets the Group’s ROE hurdle rate of 11%. These factors contribute to Swiss Re being confident to reach its overall Group ROE target of 10-12% by 2015.
Corporate Solutions growth on track; acquires Sun Alliance Insurance (China) Limited
Swiss Re’s commercial insurance arm, Corporate Solutions, is on track to deliver the announced target of USD 4-5 billion in premiums by 2015 – supported by a balanced portfolio in mature and high growth markets and active portfolio steering. As the unit prepares for its growth beyond 2015, it has launched two strategic initiatives. First, Corporate Solutions wants to expand its capabilities to act as lead insurer in primary business programmes. This offers additional benefits as such capabilities enhance client loyalty and create higher priority with brokers, according to Swiss Re.
Second, a greater emphasis will be put on 13 selected High Growth Markets. As part of this initiative, Swiss Re Corporate Solutions has agreed to acquire 100% of Chinese insurer Sun Alliance Insurance (China) Limited for GBP 71 million (approx. USD 120 million). Sun Alliance Insurance (China) Limited is currently a subsidiary of RSA Insurance Group plc. The acquisition, when completed, will enable Swiss Re Corporate Solutions to offer corporate insurance directly from mainland China. The acquisition is subject to approval from the China Insurance Regulatory Commission (CIRC).
Continued re-direction of capital and talent to High Growth Markets
Growing wealth and increasing urbanisation are key drivers for a continuing demand of re/insurance products in High Growth Markets. Already today, Swiss Re generates almost one-fifth, or around USD 5 billion of premiums, in these markets. With the overall outlook for these markets remaining intact, the growth rate for premiums is expected to stay at around 8% per year, more than double the rate in mature markets. Countries in emerging Asia are expected to lead the way. Closing the existing gap between economic growth and the lagging re/insurance penetration is expected to lead to opportunities for life insurance products in particular. As a result, the Group continues to re-direct capital and talent towards High Growth Markets to further enhance seamless client service irrespective of where they are based, according to Swiss Re.
New financial targets for 2016 onwards to be presented in February 2015
The coverage period for the 2011-2015 financial targets will come to an end in December next year. In February 2015, Swiss Re plans to announce a new set of financial targets, valid from 2016 onwards.
“The new targets will reflect our overall strategic goals for the Group and at the same time will be meaningful for each of our three Business Units. We will focus on profitability, capital management and growth. The targets will be consciously ambitious and stretch goals; we cannot afford to become complacent. We seek to continue outperforming operationally so we can produce strong returns for our shareholders while growing our profitable business,” Group Michel M. Liès, Chief Executive Officer.
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