Swiss Re, at its annual Investors’ Day Conference, unveiled its strategic framework to “position the company strongly vis-à-vis current and future opportunities and challenges facing the re/insurance industry.”
The world’s second largest reinsurer said it would stress “systematic and fast allocation of capital to access new and existing risk pools and revenue streams.” It also gave details as to how the framework would “lay the foundation to meet its financial targets over the cycle.”
Swiss Re noted that the “current insurance environment is challenged by low interest rates, industry consolidation due to continued pressure on profitability margins and volatility in high growth markets. At the same time, low insurance penetration in many parts of the world, for example, create ample opportunities.
“Proactively addressing this changed environment, Swiss Re will look to its strategic framework both to seize new and emerging opportunities and tackle existing challenges. The framework builds on the successful execution of Swiss Re’s current strategy, which has enabled it to deliver a market-leading total shareholder return of 22% on an annualized basis over the last five years.
The bulletin summarized the main aspects for future planned growth as follows:
• Four-pillar strategic framework builds on current successful strategy, enabling Swiss Re to move to the next stage of its transformation to be an agile capital allocator in insurance and associated asset risks
• Strategic framework centers on systematic and fast allocation of capital into new and existing risks, as well as broadening and diversifying Swiss Re’s client reach and optimizing resources
• It allows Swiss Re to actively differentiate itself in the industry and better positions it to achieve its new financial targets and deliver sustainable, long-term shareholder value
• From 2016 the company targets a 700 basis point return on equity above risk free, 10-year US government bonds, and to grow economic net worth per share by 10% per annum
Swiss Re’s Group CEO Michel M. Liès stated: “Since 2011, we consistently outperformed our peers, grew our business and we continue to focus, with only a few weeks to go, on delivering our 2011–2015 financial targets.
“Past success however is no guarantee for the future and therefore, we actively looked into what will shape our industry going forward. We developed our strategic framework with the trends, opportunities and challenges we identified in mind. As a result, we’ll be able to increase our agility and respond more quickly and effectively to change and to drive change ourselves.
“At the heart of our transformation journey is our aim to be an agile capital allocator in insurance and associated asset risks. We will do this with a strong balance sheet and three Business Units delivering on their core strengths, such as expert underwriting and solid client relationships.”
Swiss Re’s Group CFO David Cole added: “We have set ourselves ambitious targets for the future. Our capital position today is very strong, we have a flexible funding structure in place and we aim to maintain both. As a result, we believe our capital management priorities are attractive and they will remain unchanged.
“Maintaining a strong capital position and growing the regular dividend with long-term earnings are still our highest priorities. This is followed by the deployment of capital for business growth where it meets our profitability requirements. Finally we are committed to additional capital repatriation to shareholders, where appropriate.”
Source: Swiss Re