Walter B. Kielholz

Dear shareholders

Two years ago I wrote to you of our plans to establish a new organisational structure. The structure would allow us to be more flexible, transparent, accountable and client-focused. I can now report that the Group has successfully executed on these plans, delivering an excellent business performance in 2012 while making a seamless transition to a new Group Chief Executive Officer.

Based on this performance and in line with our commitment to active capital management, the Board of Directors will recommend a dividend of CHF 3.50 per share at this year’s Annual General Meeting. Additionally we will propose a special dividend of CHF 4.00 per share. This translates to a total return of capital to shareholders of approximately USD 2.8 billion.

These excellent results have been earned in a difficult environment. Low interest rates are a challenge for all our business lines. The regulatory landscape is also changing, in particular the regulations related to solvency, capital markets, and national and global supervision. These changes are happening in a number of jurisdictions simultaneously and will have a cumulative and cross-sector impact. In early 2013, the G-20 is expected to approve a list of re/insurance companies designated as globally systemically important. As a leading re/insurer, we play an important role in the financial system and the economy. However our core activities are neither a source nor an amplifier of systemic risk, as has been acknowledged by many regulatory bodies.

What would such a designation mean in practical terms for Swiss Re? Regulators are in the early stages of defining the policy measures that would apply to the companies appearing on this list. They are focusing on three areas – enhanced supervision, effective resolution, and loss absorption capacity. Swiss Re believes that it is well prepared to respond to requirements along these lines.

We expect the global economy to be less turbulent in the coming year. The US and European economies are expected to improve slightly, and growth in emerging markets is expected to remain quite robust. In 2012 we saw several positive developments in the euro area.

However the economic and financial market environment – particularly in Europe – remains fragile. The risks are often political: the decisions taken over the last year must now be implemented and further reforms will be necessary. Any delay increases the risk that the crisis will flare up again. We expect interest rates to rise slightly this year and next, but to remain quite low by historical standards.

I am confident that our Group is well positioned for 2013. This confidence comes from our strong capital position and the long-term relationships we have with our clients. It also reflects the power of traditional Swiss Re strengths, such as disciplined underwriting and prudent asset management.

Indeed this is an appropriate time for taking the long view, as we will be celebrating our 150th anniversary beginning in 2013. Our company was founded after the 1861 fire in Glarus, Switzerland. Two Swiss insurance companies and one bank – themselves almost still start-ups – pooled their resources to develop a reinsurance solution as had been done in other countries after similar city fires. Since then we have been in the business of protecting society against major risk events and nurturing the growth of a private sector approach to managing risks. Our outlook was global almost from the start, with the San Francisco earthquake of 1906 representing an early major international test, which we passed as with so many disasters since – hurricanes, earthquakes, winterstorms and others. We were also there when society had to cope with man-made tragedies and outrages, such as 9/11.

Swiss Re has been a key innovator in the area of reinsurance. Today we are carrying this tradition forward with insurance-linked securities, longevity swaps and partnerships with governments. For 150 years we have been expanding the boundaries of the insurance solution, not only by innovation but also by reaching out to new clients. This year when we turn 150 is the right moment to commemorate these achievements. We will have a number of events in locations around the globe for clients, media and other stakeholders, not to mention the employees who make it all possible, as well as the families who support them.

In 2012, the Swiss Re Foundation began its activities. The non-profit foundation aims to increase society’s resilience toward natural hazards, climate change, population growth, water scarcity and pandemics, along with other challenges to security, health and prosperity. The Swiss Re Foundation will also support community projects and employee volunteering in locations where Swiss Re has offices.

We are pleased to nominate Mary Francis to join us on the Board of Directors. A British citizen, she has previously served on the boards of the Bank of England and Aviva plc and worked as director general of the Association of British Insurers, among other institutions and roles. Her depth of experience and breadth of perspective will be an invaluable support in fulfilling the Board’s oversight role.

I would like to conclude by expressing my thanks to you, our shareholders. We appreciate the trust you have placed in us and we are doing all we can to earn it.

Zurich, 21 February 2013

Walter B. Kielholz
Chairman of the
Board of Director